Download this Paper Open PDF in Browser

Are Shareholder Votes Rigged?

65 Pages Posted: 7 Dec 2016 Last revised: 30 May 2017

Laurent Bach

Swedish House of Finance

Daniel Metzger

Stockholm School of Economics - Department of Finance; London School of Economics & Political Science (LSE) - Financial Markets Group; Swedish House of Finance

Date Written: May 29, 2017

Abstract

We show that management holds extraordinary power over the voting process at U.S. corporations, allowing it to block improvements to corporate governance. Using a sample of shareholder proposals from 2003 to 2016, we uncover a large and discontinuous drop in the density of voting results at the 50% threshold. Counterfactual distributions reveal that 11% of closely-contested proposals that were eventually rejected by voters were defeated because management was able to alter the voting results very precisely. These findings imply that one cannot routinely use RDD to identify the causal effects of changes in corporate governance generated by shareholder votes.

Keywords: Shareholder proposals, Shareholder voting, Manipulation, RDD

Suggested Citation

Bach, Laurent and Metzger, Daniel, Are Shareholder Votes Rigged? (May 29, 2017). Swedish House of Finance Research Paper No. 17-3. Available at SSRN: https://ssrn.com/abstract=2880523 or http://dx.doi.org/10.2139/ssrn.2880523

Laurent Bach

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Daniel Metzger (Contact Author)

Stockholm School of Economics - Department of Finance ( email )

SE-113 83 Stockholm
Sweden

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Paper statistics

Downloads
402
rank
62,013
Abstract Views
1,236