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Can Strong Corporate Governance Selectively Mitigate the Negative Influence of “Special Interest” Shareholder Activists? Evidence from the Labor Market for Directors

  • Diane Del Guercio and Tracie Woidtke


Union and public pension funds, the most prolific institutional activists employing low-cost targeting methods, are often accused of pursuing private benefits. Extant literature finds that unions representing workers, as stakeholders, are not aligned with shareholders. Limiting shareholder power may mitigate “special interest” activism but can also exacerbate managerial agency problems. In two different settings, majority approved and withdrawn shareholder proposals, we examine and find supportive evidence that the director labor market as a corporate governance mechanism can selectively mitigate the negative influence that conflicted stakeholder-shareholder union funds have over firms without stifling all influence of low-cost activists.


Corresponding author

*Del Guercio,, University of Oregon Lundquist College of Business and ECGI; Woidtke (corresponding author),, University of Tennessee Haslam College of Business.


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We thank Fabrizio Ferri (the referee) and Jarrad Harford (the editor) for helpful comments that greatly improved the paper. We also thank Henrik Cronqvist, Larry Dann, Nickolay Gantchev, Torsten Jochem, Martin Schmalz, Matthew Serfling, Hai Tran, and audience members at Georgia State University, Hong Kong University of Science and Technology, Nanyang Technological University, National University of Singapore, Singapore Management University, U.S. Securities and Exchange Commission, the University of Illinois Chicago, the University of Melbourne, the University of New South Wales, the University of Queensland, the University of Oregon brown bag, the University of Tennessee brown bag, the early research session at Drexel University’s 2011 Academic Conference on Corporate Governance, the 2012 FMA meetings, the 2012 Conference on Financial Economics and Accounting, the 2014 WFA meetings, and the 2015 Ackerman Corporate Governance Conference for helpful comments, some on an earlier version of this paper. Woidtke acknowledges support as a Kinney Family Research Fellow, a Duggan Faculty Research Fellow, and a Newcomer Research Scholar. Del Guercio acknowledges support from the Cameron Center for Finance and Securities Analysis at the University of Oregon. We also benefited from the excellent research assistance of Andrea Anthony, Brian Blank, Sean Chen, Karen Craig, Steve Liu, Heejin Park, Jae Park, and Hai Tran.



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