Tilting at Windmills or Contested Norms? Dissident Proxy Initiatives in Canada

Manuscript Type: Empirical Research Question/Issue: Do shareholder activists influence standards of legitimacy with Dissident proxy initiatives? What are the antecedents and consequences of Dissident proxy initiatives? Research Findings/Insights: We use a longitudinal Canadian sample to evaluate the dynamics of Dissident proxy initiatives. Firms with lower legitimacy are more likely to receive governance- and performance-oriented Dissident proxy initiatives. Firms with higher legitimacy were more likely to settle proxy initiatives of all types, and avoid publishing activist shareholders' concerns to all shareholders, but this relationship did not hold for governance-oriented proposals. Firms that received more governance- and performance-oriented proposals subsequently had lower legitimacy. Theoretical/Academic Implications: Dissident proxy initiatives are legitimation contests, where shareholders contest the legitimacy of corporate management's conduct. The dynamics that produce proposals and management responses are consistent with the predictions of institutional theories of legitimacy, institutional entrepreneurship, and legitimation contests. Because the ownership structure of Canadian corporations makes passage unlikely, they resemble a ritual for influencing legitimacy of a wide variety of practices. Practitioner/Policy Implications: Management's response to Dissident proxy initiatives makes a statement about the legitimacy of their conduct. Settling proxies may enable management to contribute to the acceptance or rejections of emerging practices. Management should consider whether attempts to decouple adoption of some practices from core operations are wise in the long term. Shareholder activists should consider whether management is seeking to ceremonially adopt policies demanded in dissident proxies.