Are Shareholder Votes Rigged?
65 Pages Posted: 7 Dec 2016 Last revised: 30 May 2017
Date Written: May 29, 2017
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
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