EXAMPLE 5.21 Shareholder Proposals

The U.S. Securities and Exchange Commission (SEC) entitles shareowners of a public company who own at least $2000 in market values of a company’s outstanding stock to submit shareholder proposals. A shareholder proposal is a resolution put forward by a shareholder, or group of shareholders, to be voted on at the company’s annual meeting. Shareholder proposals serve as a means for investor activists to effect change on corporate governance and activities. Proposals can range from executive compensation to corporate social responsibility issues, such as human rights, labor relations, and global warming. The SEC requires companies to disclose shareholder proposals on the company’s proxy statement. Proxy statements are publicly available.

In a study of 1532 companies, data were gathered on the counts of shareholder proposals per year.¹³ The mean number of shareholder proposals can be found to be 0.5157 per year. We would find that observed variance of the counts is 1.1748, which is more than twice the mean value. This implies that the counts are varying to a greater degree than expected by the Poisson model. As noted with Example 5.15 (page 262), this phenomenon is known as overdispersion. Figure 5.11 shows a JMP produced graph of a Poisson distribution with overlaid on the count data. The figure shows the incompatibility of the Poisson model with the observed count data. We find that there are more zero counts than expected, along with more higher counts than expected.