In recent years boards have become significantly more likely to implement non-binding, majority-vote (MV) shareholder proposals. Using a sample of 620 MV proposals between 1997 and 2004, we find that shareholder pressure (e.g., the voting outcome and the influence of the proponent) and the type of proposals are the main determinants of the implementation decision, while traditional governance indicators do not seem to affect the decision. We then examine the labor market consequences of the implementation decision for outside directors and find that directors implementing MV shareholder proposals experience a one-fifth reduction in the likelihood of losing their board seat as well as other directorships.

We study 134 vote-no campaigns and 1,198 shareholder proposals related to executive pay between 1997 and 2007. Union pension funds sponsor most of these initiatives, yet their targeting criteria do not appear to reflect labor-related motives. Shareholders favor proposals related to the pay-setting process (e.g., subject severance pay to shareholder approval) over proposals that micromanage pay level or structure. While activists target firms with high CEO pay (whether excessive or not), voting support is higher only at firms with excess CEO pay. Firms with excess CEO pay targeted by vote-no campaigns experience a significant reduction in CEO pay ($7.3 million). Our findings contribute to the debate on “say on pay” and other reforms empowering shareholders.

We study whether outside directors are held accountable for poor monitoring of executive compensation by examining the reputation penalties to directors of firms involved in the option backdating (BD) scandal of 2006–2007. We find that, at firms involved in BD, significant penalties accrued to compensation committee members (particularly those who served during the BD period) both in terms of votes withheld when up for election and in terms of turnover, especially in more severe cases of BD. However, directors of BD firms did not suffer similar penalties at non-BD firms, raising the question of whether reputation penalties for poor oversight of executive pay are large enough to affect the ex ante incentives of directors.

ABSTRACT We examine outside board appointments of executives allegedly involved in governance failures—“tainted” executives—to shed light on appointing firms’ underlying motivations. Less attractive firms and those with greater advising needs are more likely to appoint tainted executives to their boards than other firms are. Tainted appointees are less likely to be placed on the nominating and governance committees than nontainted appointees. Tainted appointees have similar or better skill sets compared with nontainted appointees. Firms that appoint tainted executives to their boards display an improvement in operating performance in the postappointment period relative to the preappointment period and relative to a matched control sample. We do not find evidence of poor monitoring outcomes for these firms. Overall, our evidence suggests that board needs, not a conspicuous attempt to weaken monitoring, drive the appointment of tainted executives to boards. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G34; K22; M41.

ABSTRACT We investigate executive employment gaps (hereafter, gaps) between the appointment of an external CEO at a public firm and the individual's prior executive position at a public company. These gaps cannot be reliably obtained from common databases. We hand‐collect data for externally hired CEOs at public companies from 1992 to 2014. These CEOs represent approximately 40% of the 5,095 CEO successions and have a mean gap of 1.9 years. The gap increases to 3.2 years for the subset of new hires with a gap. We hypothesize that labor market frictions and executive skill sets contribute to the existence and length of these gaps. Using theories from labor economics, we predict (equilibrium) associations between two measures of “fit” (executive compensation and long‐term match quality) and gaps (both existence and length). Finally, we provide descriptive evidence on what executives do (e.g., sit on boards, work for private consulting companies, or consume leisure) during their gaps. This project was subject to and published through a registered report process. Any tests that were not included in the accepted proposal are marked as unplanned analyses.