Can Shareholder Proposals Hurt Shareholders? Evidence from Securities and Exchange Commission No-Action-Letter Decisions

2021 ◽  
Vol 64 (1) ◽  
pp. 107-152
Author(s):  
John G. Matsusaka ◽  
Oguzhan Ozbas ◽  
Irene Yi
Keyword(s):  
Securities And Exchange Commission ◽  
Shareholder Proposals

Shareholder Proposals on the Auditor–Client Relationship: The Case of Nonaudit Service Purchases

2017 ◽  
Vol 34 (2) ◽  
pp. 179-203 ◽  
Author(s):  
Dana R. Hermanson ◽  
Dasaratha V. Rama ◽  
Zhongxia (Shelly) Ye
Keyword(s):  
Empirical Evidence ◽  
Control Sample ◽  
Securities And Exchange Commission ◽  
Subsequent Reduction ◽  
Public Companies ◽  
Shareholder Proposals ◽  
Client Relationship ◽  
Independent Auditors ◽  
Auditor Selection

This article provides empirical evidence on shareholder proposals seeking to restrict nonaudit service (NAS) purchases by public companies from their independent auditors. Our analysis is based on 104 instances of shareholder proposals seeking to restrict NAS provided by independent auditors, received by 94 firms during a unique period from 2001 to 2004 (when the Securities and Exchange Commission [SEC] allowed such proposals to proceed to shareholder votes), and a control sample that did not receive such proposals. We find that firms targeted by shareholders had higher nonaudit fee ratios. We also find that firms receiving such shareholder proposals are likely to have steeper subsequent declines in the nonaudit fee ratio than firms not receiving such proposals. Finally, considering only the subset of firms that have a shareholder vote on proposals seeking to restrict NAS purchases, the subsequent reduction in the nonaudit fee ratio is positively related to the magnitude of the proportion of votes in favor of the shareholder proposal. Our findings suggest that permitting shareholder participation in issues related to the auditor–client relationship can lead to significant changes in the nature of the auditor’s relationship with the client, and they call into question recent SEC actions permitting companies to restrict shareholder participation in issues related to auditor selection.

SEC staff issues guidance on Rule 14a-8 calling for board involvement in evaluating shareholder proposals

2018 ◽  
Vol 19 (1) ◽  
pp. 20-27 ◽  
Author(s):  
Richard J. Parrino ◽  
Alan Dye ◽  
Alex Bahn
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Decision Making Process ◽  
Content Type ◽  
Policy Issues ◽  
Shareholder Proposals ◽  
Business Operations ◽  
Depth Analysis ◽  
Board Level ◽  
Directors And Officers

Purpose This paper examines a legal bulletin issued by the staff of the Securities and Exchange Commission (SEC) in November 2017 that provides significant new guidance to SEC-reporting companies on the application of the “ordinary business” and “economic relevance” exceptions in Rule 14a-8 under the Securities Exchange Act of 1934. Rule 14a-8 governs an SEC-reporting company’s obligation to include shareholder proposals in its proxy materials for a shareholder meeting. Design/methodology/approach This paper provides in-depth analysis of the new interpretive guidance against the background of continuing controversy between companies and shareholder-proponents over the bases on which companies should be permitted to exclude from their proxy materials proposals that proponents believe raise social, ethical or other policy issues that are appropriate for shareholder action. Findings In acting on a company’s request to exclude a proposal, the SEC staff must make difficult judgments regarding the connection between policy issues reflected in the proposal and the company’s business operations, which the company’s directors and officers seek to conduct free of inappropriate shareholder oversight. In the new guidance, the staff calls for assistance in making these judgments by soliciting greater board-level involvement in the exclusion determination and encouraging the company in its no-action submission to discuss the board’s analysis and decision-making process. Greater board participation should encourage a more probing assessment of the considerations weighed in these determinations. Originality/value This paper provides expert guidance on a major new SEC disclosure requirement from experienced securities lawyers.

Relationship between Code of Corporate Governance and Corporate Financial Performance (An Empirical Study of Food Companies Listed on KSE)

GIS Business ◽  
2017 ◽  
Vol 12 (4) ◽  
pp. 01-09
Author(s):  
Asma Rafique Chughtai ◽  
Afifa Naseer ◽  
Asma Hassan
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Securities And Exchange Commission ◽  
Executive Directors ◽  
Agency Conflicts ◽  
Cross Sectional ◽  
Return On Equity ◽  
Governance Practices ◽  
Code Of Corporate Governance ◽  
The Impact

The crucial role that implementation of Code of Corporate Governance plays on protecting the rights of minorities, shareholders, local as well as foreign investors cannot be denied. Companies all over the world are required to implement their respective Code of Corporate Governance for avoiding agency conflicts between companies management and stakeholders and for assuring transparency in accountability. This paper aims at exploring the impact of implementation of corporate governance practices (designed by Securities and Exchange Commission of Pakistan) have on the financial position of companies. For explanatory variables of the study, composition of the board as per the Code of Corporate Governance that comprises of presence of independent, executive and non-executive directors has been taken into consideration. Return on equity has been taken as an indicator of firms profitability i.e. the dependent variable. For this study, companies listed on food producing sector of Karachi Stock Exchange have been screened for excogitation of the relationship. It is an empirical research based on nine years data from 2007–2015. Using Hausman Test for selecting the data analysis technique between Fixed or Random, Fixed Cross Sectional Panel Analysis has been used for analysis of the data collected. Findings indicate that presence of independent, executive and non-executive directors as per the code requirements levies a significant impact on the profitability of companies indicated by return on equity. It is, thus concluded that companies should ensure compliance with code of governance practices to reduce not only the agency issues but also to increase their profitability.

FUNDS STATEMENTS: THE ACCOUNTING PRINCIPLES BOARD WAS TWICE BEHIND THE CURVE

2015 ◽  
Vol 42 (2) ◽  
pp. 91-102 ◽  
Author(s):  
Stephen A. Zeff
Keyword(s):  
New York ◽  
Stock Exchange ◽  
Securities And Exchange Commission ◽  
New York Stock Exchange ◽  
Accounting Principles ◽  
York Stock Exchange

This paper discusses the circumstances in which the Accounting Principles Board (APB) issued Opinions 3 and 19, in 1963 and 1971, respectively, when the Board encouraged and then required companies to publish a statement of source and application of funds, known as the funds statement. In doing so, the Board both times lagged behind company practice and the views of influential organizations, including the New York Stock Exchange and the Securities and Exchange Commission.

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