Corporate Directors Learn from Environmental Shareholder Engagements

SSRN Working Paper
Sustainable & Impact Investing, Corporate Governance & Sustainability

We examine whether corporate directors learn from environmental engagements by studying the success and implementation of environmental shareholder proposals. We show that the withdrawal of an environmental shareholder proposal leads to an improvement in the environmental performance of targeted firms. Most importantly, we find that a proposal withdrawal leads to an 8.6% increase in the environmental performance of non-targeted firms that are connected to the target firm through overlapping directorships. Since the engagement at the target firm is exogenous to the connected firm, we causally show that directors learn from engagements. Our results imply that environmental shareholder engagements improve corporate directors’ attention to and knowledge of environmental issues and that this improvement has effects on the firms they serve.

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