Voting for Socially Responsible Corporate Policies
46 Pages Posted: 1 Apr 2022 Last revised: 23 Feb 2023
Date Written: February 22, 2023
Abstract
We examine voting for corporate policies when voters face a trade-off between maximizing firm value and implementing social objectives (like minimizing pollution). We show voting can aggregate preferences and lead to stable policies when a firm cares about one social objective in addition to firm value. But when voters care about two or more social objectives it can lead to governance indeterminacy or volatility in firm policies. We show an agenda setter (e.g., activist investor or CEO) can influence policy choice, but this power is not absolute. Our findings have implications for the design and regulation of proxy voting rules.
Keywords: Corporate governance, ESG, Shareholder Voting, Social Choice Theory, Socially Responsible Investing, Sustainability
JEL Classification: G12, G14
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