Berkeley Program in Law and Economics

This article assesses the impact of the 1992 SEC reforms that enhanced the ability of shareholders to communicate during a proxy contest. Utilizing a sample of 361 share-holder-sponsored corporate governance issue proposals from 1991 to 1995, the article finds that the mean percentage of total outstanding votes cast in favor of an issue proposal declined significantly post-reform. As explanation, the article furnishes evidence that certain sponsors interested in their own private agenda rather than general shareholder welfare exploited more fully the proxy mechanism post-reform; controlling for the com-position of sponsors, the proxy reforms generated no significant change in the for-vote outcome of issue proposals. The article concludes instead that the reforms resulted in a shift in the composition of issue proposals targets toward companies relatively less vul-nerable to such proposals pre-reform.