Abstract

Paper Authors: Ronald W. Masulis, Qi Wang

Prevailing board literature focuses on voting and leaves little room for agenda-setting. By exploring board disclosures in China, we show that minority blockholders dissent through appointed directors on tunneling proposals and pre-emptively prohibit tunneling proposal initiation, via agenda-setting power and pre-vote communication with insiders. A policy shock on their power and individual-meeting-level communication shocks corroborate causality. Dissent pressures insiders through negative media coverage, regulatory inquiries, and vetoes in subsequent shareholder meetings, further prompting pre-vote communication to avert such public backlash. When publicly conflicting insiders (politically-affiliated) are riskier, minority blockholders dissent less but use agenda-setting more, suggesting two channels substitute. Focusing only on voting may overlook the complete governance chain.

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