Shareholder Monitoring and Voting
Paper Session
Sunday, Jan. 8, 2023 1:00 PM - 3:00 PM (CST)
- Chair: Nadya Malenko, University of Michigan
Proxy Advisory Firms and Corporate Shareholder Engagement
Abstract
We examine the influence of proxy advisors on firms’ shareholder engagement behavior. Our analyses exploit a quasi-natural experiment using Say-On-Pay voting outcomes near a threshold that triggers a review of engagement activities by Institutional Shareholder Services (ISS). Firms receiving ISS treatment exhibit a swift and substantive increase in engagement, especially those with weaker ex-ante governance. The elevated engagement persists beyond the period of ISS scrutiny. Treated firms alter elements of compensation and pay transparency that align with shareholder feedback, and enjoy ex-post economic benefits. Our findings indicate a disciplinary spillover effect of ISS through enhanced and enduring firm-shareholder interactions.What Is the Impact of Mutual Funds' ESG Preferences on Portfolio Firms?
Abstract
Mutual funds must publish policies announcing how they generally vote on the different ballot items at the shareholder meetings of their portfolio firms. I manually collect 17,000 of these policies for a sample of 29 of the largest U.S. mutual fund families over 2006-2018. I find that voting policies are a major predictor of funds' voting behavior. Exploiting staggered changes in funds' voting policies, I show that investee companies adopt their mutual fund shareholders' preferred governance provisions. This adoption is the result of mutual fund shareholders' active voting. Announced voting policies also stimulate strategic proposal submissions by non-mutual fund shareholders.Do Mutual Funds Represent Individual Investors?
Abstract
In recent decades, investors have wielded their voting power to influence the direction of corporate policy. Although mutual funds have widely varying voting patterns and predictable ideological disagreements, little is known about whether their underlying investors have similar preferences. I provide the first systematic documentation comparing the voting preferences of individual investors in the United States to those of the mutual funds they invest in. I begin by presenting aggregate voting statistics, showing that, in the aggregate, individual investors vote similarly to mutual funds on SRI and management proposals. Since these numbers come from the subset of individual investors who vote, I adjust for sample selection bias on unobservable variables using access to additional voting methods, which provides variation in turnout that is unrelated to voting choices. I show (preliminarily) that sample selection bias does not appear to have a large aggregate impact. I next turn to the relationship between how individuals vote and how the funds they own vote. I find that although individual investors are highly ideological in their voting, there is generally no relationship between how a fund votes and the preferences of its individual investors. I explore the sources of this divergence, providing evidence for limited attention of individual investors.Discussant(s)
Ernst Maug
,
University of Mannheim
Felipe Cabezon
,
Virginia Tech
Davidson Heath
,
University of Utah
Enrichetta Ravina
,
Federal Reserve Bank of Chicago
JEL Classifications
- G3 - Corporate Finance and Governance