Nonbinding Voting for Shareholder Proposals

44 Pages Posted: 12 Jan 2009 Last revised: 25 Apr 2014

See all articles by Doron Levit

Doron Levit

University of Pennsylvania - Finance Department; European Corporate Governance Institute (ECGI)

Nadya Malenko

Boston College - Department of Finance; Centre for Economic Policy Research (CEPR)

Date Written: October 1, 2011


Shareholder proposals are a common form of shareholder activism. Voting for shareholder proposals, however, is nonbinding since management has the authority to reject the proposal even if it received majority support from shareholders. We analyze whether nonbinding voting is an effective mechanism for conveying shareholder expectations. We show that, unlike binding voting, nonbinding voting generally fails to convey shareholder views when manager and shareholder interests are not aligned. Surprisingly, the presence of an activist investor who can discipline the manager may enhance the advisory role of nonbinding voting only if conflicts of interest between shareholders and the activist are substantial.

Keywords: Shareholder voting, shareholder proposals, non-binding proposals, precatory resolutions, advisory vote, strategic voting, majority rule, information aggregation, proxy fight, shareholder activism

JEL Classification: D72, D74, D82, D83, G34, K22

Suggested Citation

Levit, Doron and Malenko, Nadya, Nonbinding Voting for Shareholder Proposals (October 1, 2011). Journal of Finance, Vol. 66, No. 5, 2011. Available at SSRN:

Doron Levit (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

European Corporate Governance Institute (ECGI) ( email )

B-1050 Brussels

Nadya Malenko

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

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