Shareholder Proposal Rules and Practice: Evidence from a Comparison of the US and UK

We provide an in-depth comparison of US and UK shareholder proposal rules and relate the differences in rules to differences in proposing activities and performance, using comprehensive shareholder proposal data from both countries for 2000 through 2006. UK proposal rules are more onerous on proposal sponsors but UK proposals seem to be a more powerful governance device than US counterparts since they are binding and UK shareholders have the statutory right to call special meetings and elect directors. We observe most UK proposals are presented at special meetings and target board election. Institutions are the most active sponsor of UK proposals. As US proxy rules emphasize shareholder participation and protection rather than empowerment, there are a significantly greater number of shareholder proposals initiated in the US during the sample period, and small shareholders and social proposals dominate the proposing scene of the US. Our results suggest that shareholders can impact the corporate governance and firm performance but that the methods through which shareholders are empowered are important. We also argue that our results suggest that it may be appropriate to consider whether activist shareholders have additional responsibilities to the firm and other shareholders, including a duty to disclose their agendas or a fiduciary duty to other shareholders.