An Analysis of Withdrawn Shareholder Proposals

This study visits the role of shareholder proposals in the governance of public corporations by studying withdrawn shareholder proposals. Among all shareholders, unions are the most likely to withdraw proposals. Furthermore, firms with a record of poor performance, lower insider ownership and more independent boards are likely to see proposals withdrawn. Since unions often possess a high level of bargaining power, we put emphasis on the behavior of unions. We find that unions resubmit proposals that have gained high shareholder support in the prior year. About fifty percent of those resubmitted proposals are withdrawn prior to the annual shareholder meetings. In addition, almost all of those proposals do not reappear in the following year, implying that the issues underlying those proposals have been settled. This phenomenon indicates that unions submit shareholder proposals strategically. Furthermore, it is more likely for unions to adopt this strategy when the prior voting support is higher, when the insider ownership is lower, and when the ownership is less dispersed. The identified strategy played by unions suggests that unions use shareholder proposals for union workers at the expense of shareholder value.