An Agenda-Setting Model of Stakeholder Influence

Existing research has shown that when multiple demands from stakeholder activists are directed at a firm in a sequential manner, the multiple demands build on each other to magnify activist pressure and thereby enhance activists’ capacity to influence firm outcomes. However, in many instances, multiple demands from stakeholder activists are not directed at a firm sequentially, but simultaneously. Yet, when multiple activist demands are directed at the same firm at the same time, these demands compete for attention from decision makers in the firm and risk crowding each other out, thereby hampering the ability of any individual activist demand to influence firm outcomes. Building on this premise, we propose an agenda setting model of stakeholder influence where multiple activist demands compete for space on the agenda of decision makers in firms. To test this model, we look at the shareholder proposal process in the United States and specifically examine the shareholder proposal campaign between 2006 and 2010 for the introduction of Say on Pay – a corporate governance policy that consists in submitting a firm’s executive compensation plan to a vote from shareholders. Consistent with the crowding out hypothesis, we find that Say on Pay proposals were more effective when firms received fewer shareholder proposals on other issues in the same year. And once adopted as part of the regular agenda of the annual meeting, Say on Pay was more effective at curbing CEO compensation when firms received fewer shareholder proposals on other issues in the same year."