@article{3cb63a9f9fef4713b09f564b2487cbfd,
title = "Lower Defeat Thresholds for Minority Shareholders and Corporate Governance: Evidence from the Australian “Two-Strikes” Rule",
abstract = "This study assesses the impact of minority shareholder empowerment via lower defeat thresholds in “say-on-pay” votes on CEO compensation and career prospects for directors. We exploit the adoption of the Australian “two-strikes” rule as a quasi-exogenous shock, which empowers shareholders to vote on board dismissal if a firm{\textquoteright}s remuneration report receives 25 percent or more dissent votes for two consecutive years. Using a difference-in-differences methodology, we find that firms respond to a “strike” by curbing excessive CEO pay. Under the two-strikes regime, independent directors are held more accountable for poor oversight and experience significant reputational penalties in terms of turnover and the loss of outside directorships subsequent to receiving a strike. The results are mainly driven by firms receiving a nonmajority strike, indicating that the effectiveness of the two-strikes regime stems largely from the lower defeat threshold.",
keywords = "ASX firms, lower defeat thresholds, say on pay, two-strikes rule",
author = "Martin Bugeja and {da Silva Rosa}, Raymond and Yaowen Shan and Terry Walter and David Yermack",
note = "Funding Information: We appreciate the constructive suggestions from Christopher S. Armstrong (editor), and two anonymous reviewers. We also appreciate helpful comments from Jere Francis, Wayne Landsman, Zoltan Matolcsy, Vic Naiker, and Stephen Taylor. We thank the conference participants at AAA, AFAANZ, Asian FA, 2019 BAFA, 2019 EAA, 2019 FMA Europe, and the 2019 FMCG Conference, and seminar participants at: HEC Paris, Carlos III University, Erasmus University Rotterdam, Florida State University, Griffith University, Macquarie University, The University of Adelaide, University of Technology Sydney, The University of Western Australia, and Yeshiva University. Part of this research was completed while David Yermack was a visiting professor at Erasmus University Rotterdam. Financial support for this research was provided by the Centre for International Finance and Regulation (CIFR), the Australian Research Council, and the University of Technology Sydney. Publisher Copyright: {\textcopyright} 2023 American Accounting Association. All rights reserved.",
year = "2023",
month = nov,
doi = "10.2308/TAR-2020-0434",
language = "English",
volume = "98",
pages = "61--96",
journal = "Accounting Review",
issn = "0001-4826",
publisher = "American Accounting Association",
number = "7",
}