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

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.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.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.Do shareholder activists influence standards of legitimacy with Dissident proxy initiatives? What are the antecedents and consequences of Dissident proxy initiatives?Empirical Do shareholder activists influence standards of legitimacy with Dissident proxy initiatives? What are the antecedents and consequences of Dissident proxy initiatives? 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. 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. 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.