Friday, November 12, 2010

HBS Research Finds Positive Market Value of Proxy Access

In a recently released study titled "Does Shareholder Proxy Access Improve Firm Value? Evidence from the Business Roundtable Challenge", the authors--Becker, Bergstresser, and Subramanian of Harvard Business School--argue "that financial markets place a positive value on shareholder access".

As published earlier, on October 4, the SEC granted a Stay of proxy access following litigation by the Business Roundtable and the US Chamber of Commerce. Consequentially, there has been some ongoing debate as to whether or not proxy access will go into effect. Should it not get into effect, and the paper's conclusions are accurate, firms will miss out in a potential source of value creation.

According to the research, as manifested in the SEC's final Rule 14a-11, shareholder access improves overall shareholder value.
"We find that firms that would have been most affected by proxy access, as measured by overall institutional ownership, lost 17 basis points of value for each standard deviation of ownership.  For firms that were owned more by historically activist institutions, the value lost was nearly four times as large." [emphasis added]
The paper can be found here.

Posted by David Schatz