Does Shareholder Proxy Access Improve Firm Value? Evidence from the Business Roundtable Challenge

Bo  Becker; Guhan   Subramanian; Daniel B. Bergstresser

Article | Journal of Law & Economics | February 2013

Does Shareholder Proxy Access Improve Firm Value? Evidence from the Business Roundtable Challenge

by Bo Becker, Guhan Subramanian and Daniel B. Bergstresser

Abstract

We use the Business Roundtable's challenge to the SEC's 2010 proxy access rule as a natural experiment to measure the value of shareholder proxy access. We find that firms that would have been most vulnerable to proxy access, as measured by institutional ownership and activist institutional ownership in particular, lost value on October 4, 2010, when the SEC unexpectedly announced that it would delay implementation of the Rule in response to the Business Roundtable challenge. We also examine intra-day returns and find that the value loss occurred just after the SEC's announcement on October 4. We find similar results on July 22, 2011, when the D.C. Circuit ruled in favor of the Business Roundtable. These findings are consistent with the view that financial markets placed a positive value on shareholder access, as implemented in the SEC's 2010 Rule.

Keywords: Financial Markets; Business and Shareholder Relations;

Format: Print

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Citation:

Becker, Bo, Guhan Subramanian, and Daniel B. Bergstresser. "Does Shareholder Proxy Access Improve Firm Value? Evidence from the Business Roundtable Challenge." Journal of Law & Economics 56, no. 1 (February 2013): 127–160.

Case | HBS Case Collection | February 2019 (Revised January 2020)

Pierre Foods Acquisition of Advance Foods (A)

Guhan Subramanian and Mike Harmon

This case (A), and its related cases (B-E), establish a setting to discuss an M&A transaction and some of the key legal contracts that are associated with it. In 2010, private equity backed food manufacturer Pierre Foods is contemplating the acquisition of a key competitor, Advance Foods. The acquisition would be debt financed, and would involve the “rollover” of an equity stake by the selling shareholders. There are five key documents to be negotiated: The Stock Purchase Agreement (Cases B-1, B-2), the Stockholders’ and Registration Rights Agreements (Cases C-1, C-2), the Credit Agreement (Cases D-1, D-2), and the Employment Agreement (Cases E-1, E-2). These agreements have been drafted, but each contain a handful of open business points which the parties need to resolve. The cases look at these open points from the perspective of each of the key parties involved, including Pierre’s majority shareholder, Oaktree Capital Management, the selling shareholders, the target’s management team, and the lenders to the acquisition facility. Overall, these cases can be used to understand the unique elements of a complex corporate transaction, how the key documents allocate risk and value, and how parties may make trade-offs to achieve outcomes that best match their priorities.

Keywords: Mergers and Acquisitions; Contracts; Agreements and Arrangements; Negotiation; Complexity;

Citation:

Subramanian, Guhan, and Mike Harmon. "Pierre Foods Acquisition of Advance Foods (A)." Harvard Business School Case 919-022, February 2019. (Revised January 2020.) View Details

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Does Shareholder Proxy Access Improve Firm Value? Evidence from the Business Roundtable Challenge

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