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Shareholder Activism and Voluntary Disclosure Initiation: The Case of Political Spending

Using corporate political spending disclosures as our empirical setting, we conduct a detailed inquiry of shareholder proposals to highlight the role of shareholder activism in the diffusion of disclosure practices. We examine a sample of 541 political spending-related shareholder proposals from 2004 to 2012. In a departure from prior research, we examine both proposals voted on and proposals withdrawn by the activist, allowing us to more comprehensively assess the success of shareholder activism. We find that 20% of disclosure proposals are subsequently implemented by targeted firms, with implementation rates varying significantly by proposal type – 8% for proposals voted on versus 56% for withdrawn proposals. We also find that unions and public pension funds are less likely to target firms with agency problems, are less successful in having proposals withdrawn, and the implementations they do obtain are viewed as value-destroying by the broader investor base. Our findings highlight shareholder proposals as one mechanism by which investors can express their preferences for and successfully influence corporate disclosure policies. Given activists’ long-standing interest in compensation and social disclosure policies, we believe our findings can generalize to these other disclosure settings.