Audit Committee Elections

• In Event: Audit Committees and Corporate Governance

Abstract

Voting in directors’ elections is one of few mechanisms that shareholders can use to influence corporate governance choices. We study elections of directors who serve on the audit committee, a topic receiving little attention in past work. As a baseline, we provide evidence that audit committee members receive greater shareholder support than other independent board members. We further find that more qualified audit committee members in terms of accounting expertise receive greater support. However, we also find that members of the audit committee receive lower shareholder approval when they fail to perform their fiduciary duty and effectively monitor the financial reporting process while other independent board members are less affected by these same financial reporting factors. Importantly, we document that lower shareholder votes are associated with subsequent improvements in audit committee composition and effectiveness, suggesting that shareholders should exercise their right to vote.

Authors

• Ronen Gal-Or, Northeastern University

• Rani Hoitash, Bentley University

• Udi Hoitash, Northeastern University