Do Boards Pay Attention When Institutional Investor Activists 'Just Vote No'?

We examine 'just vote no' campaigns, a recent innovation in low-cost shareholder activist tools whereby activists encourage their fellow shareholders to withhold votes toward a director's election to express dissatisfaction with management performance or the firm's corporate governance structure. Grundfest (1993) argues that a substantial withheld vote will motivate directors to take immediate action to avoid further embarrassment. We find a variety of supportive evidence, including operating performance improvements and abnormal disciplinary CEO turnover, indicating that campaigns induce boards to take actions in shareholders' interests. Furthermore, abnormal turnover is robust to controlling for concurrent events and firm- and CEO-specific controls