Skip to main content
Corp Governance Disclosure

The Changing Landscape of Corporate Governance Disclosure: Impact on Shareholder Voting

October 26, 2023

Director skills matrices, which present qualifications and expertise in image-based formats, are becoming increasingly more common in proxy statements. The percentage of firms disclosing these skills matrices grew from 5% in 2011 to 65% in 2021. What is the purpose of these matrices? Do they contain valuable information for investors or are just an opportunity for window-dressing?

Using data from all S&P1500 firms over the 2011–2021 period, Professors Becher and Lowry provide evidence that skills matrices are informative. Matrices decrease investors’ costs of evaluating directors up for re-election and diminish investors’ reliance on proxy advisory service companies. Specifically, the authors find that when there is disagreement between management and ISS, the presence of a skill matrix increases active voters’ propensity to come to a different conclusion from ISS by five percentage points.

Additionally, the effects of these image-based disclosures on investors’ propensity to vote independently from ISS are greatest when ISS’s recommendation is less precise. While overall a good development, investors should also beware - skill matrices are associated with greater support for directors and so are used as window dressing particularly in firms that are underperforming their peers in terms of stock returns.

The full research paper PDF can be found here

Read more news
Related Stories

ISS, the largest proxy advisory service company, has just released their annual proposed voting guidelines. Michelle Lowry, PhD, provides more insight into the new ISS guidelines.

A Drexel LeBow study shows that investor research on the governance of companies in their portfolios puts the pressure on to make value-increasing changes.

Shareholders in areas hit by a hurricane change their perception of climate-related risks and become more likely to vote in favor of an environmental proposal.