Employing a novel approach with unique data on public sentiment and a new metric on shareholder concerns, we establish an association between shareholder actions and public sentiment about a firm. The number of shareholder proposals effectively captures investor dissatisfaction, particularly since it includes firms with no shareholder proposals. We find that negative public sentiment about financial, governance, environmental or social issues is associated with more shareholder proposals, and we establish causality through a creative instrumental variable approach. Further, shareholder actions have real consequences as a larger number of shareholder proposals appears to result in higher turnover for CEOs and directors.

This paper documents the rise of “poison bonds”—corporate bonds that allow bondholders to demand immediate repayment in change-of-control events. The share of poison bonds among new issues has grown substantially in recent years, from below 20% in the 1990s to over 60% since the mid-2000s, predominantly driven by investment-grade issues. We show that a key factor behind this rise is shareholders' aversion to poison pills, leading firms to issue poison bonds as an alternative. Moreover, our analysis suggests that this practice can entrench incumbent managers and destroy shareholder value. Holding a portfolio of firms that remove poison pills but promptly issue poison bonds generates negative abnormal returns of -7.3% per year. Our findings have important implications for the agency theory of debt: (i) more debt may not discipline the management; and (ii) even without financial distress, managerial entrenchment can lead to agency conflicts between shareholders and creditors.

We study how corporate governance impacts social costs. Our parsimonious principal-agent model with production externalities predicts that firms substitute towards higher-powered incentives in response to increased monitoring costs. This shift in governance mechanisms boosts production, but also amplifies social costs. We confirm this prediction using asset-level data on production and workplace safety in the coal industry. To establish causality, we exploit plausibly exogenous increases in monitoring costs driven by politically motivated coal divestment initiatives imposed on prominent activist institutional investors. Our findings highlight that firms' choices of governance mechanisms can have significant implications for their social and environmental performance.