Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • March 2009
  • Article
  • Accounting Review

The Impact of Shareholder Activism on Financial Reporting and Compensation: The Case of Employee Stock Options Expensing

By: F. Ferri and Tatiana Sandino
  • Format:Print
ShareBar

Abstract

We examine the economic consequences of more than 150 shareholder proposals to expense employee stock options (ESO) submitted during the proxy seasons of 2003 and 2004, the first case in which the SEC allowed a shareholder vote on an accounting matter. Our results indicate that these proposals affected accounting and compensation choices. Specifically, (i) targeted firms were more likely to adopt ESO expensing relative to a control sample of S&P 500 firms, (ii) among targeted firms, the likelihood of adoption increased in the degree of voting support for the proposal, and (iii) non-targeted firms were more likely to adopt ESO expensing when a peer firm was targeted. Additionally, (i) CEO pay decreased in firms in which the proposal was approved relative to a control sample of S&P 500 firms, and (ii) among targeted firms, approval of the proposal was associated with decreases in CEO compensation and the use of ESO in CEO pay. Our findings reveal an increasing influence of shareholder proposals on governance practices.

Keywords

Shareholder Activism; Shareholder Votes; Stock Option Expensing; Executive Compensation; Financial Reporting; Employee Stock Ownership Plan; Corporate Governance; Business and Shareholder Relations; Investment Activism

Citation

Ferri, F., and Tatiana Sandino. "The Impact of Shareholder Activism on Financial Reporting and Compensation: The Case of Employee Stock Options Expensing." Accounting Review 84, no. 2 (March 2009): 433–466.
  • SSRN
  • Find it at Harvard

About The Author

Tatiana Sandino

Accounting and Management
→More Publications

More from the Authors

    • 2020
    • Faculty Research

    From Online Content to Offline Results: Effects of a Best Practices Initiative on an Enterprise Social Network

    By: Shelley Xin Li and Tatiana Sandino
    • July 2020
    • Accounting Review

    Who Should Select New Employees, Headquarters or the Unit Manager? Consequences of Centralizing Hiring at a Retail Chain

    By: Carolyn Deller and Tatiana Sandino
    • February 2020
    • Management Science

    Effects of a Tournament Incentive Plan Incorporating Managerial Discretion in a Geographically Dispersed Organization

    By: Carolyn Deller and Tatiana Sandino
More from the Authors
  • From Online Content to Offline Results: Effects of a Best Practices Initiative on an Enterprise Social Network By: Shelley Xin Li and Tatiana Sandino
  • Who Should Select New Employees, Headquarters or the Unit Manager? Consequences of Centralizing Hiring at a Retail Chain By: Carolyn Deller and Tatiana Sandino
  • Effects of a Tournament Incentive Plan Incorporating Managerial Discretion in a Geographically Dispersed Organization By: Carolyn Deller and Tatiana Sandino
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College