Managerial Reliance on the Retail Shareholder Vote: Evidence from Proxy Delivery Methods

Management Science, Forthcoming

53 Pages Posted: 18 May 2017 Last revised: 29 Oct 2019

See all articles by Choonsik Lee

Choonsik Lee

University of Rhode Island

Matthew E. Souther

University of South Carolina - Darla Moore School of Business

Date Written: December 3, 2018

Abstract

Recent studies document the increasing effectiveness of shareholder voting as a monitoring mechanism. Because both directors and the market respond to shareholder votes, management has stronger incentives to influence voting outcomes. We identify one channel through which management can affect voting outcomes: increasing the turnout of (typically management-friendly) retail shareholders. Our study focuses on an observable managerial choice of how to deliver proxy materials to maximize retail turnout. Management can opt to send a full set of proxy materials to all shareholders, which increases retail turnout but also increases printing and mailing costs, or they can send a notice directing shareholders to proxy materials available online, which reduces costs but also decreases retail turnout. We find that managers are more likely to choose to deliver a full set of proxy materials when there are contentious items on the ballot for which they need additional voting support; and, indeed, the resulting support increases the likelihood that voting outcomes will align with management recommendations.

Keywords: Electronic proxy rules, Retail shareholder, Proxy vote

JEL Classification: G34, G38

Suggested Citation

Lee, Choonsik and Souther, Matthew, Managerial Reliance on the Retail Shareholder Vote: Evidence from Proxy Delivery Methods (December 3, 2018). Management Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2970650 or http://dx.doi.org/10.2139/ssrn.2970650

Choonsik Lee

University of Rhode Island ( email )

Ballentine Hall
7 Lippitt Road
Kingston, RI 02881
United States

HOME PAGE: http://sites.google.com/site/choonsiklee79/

Matthew Souther (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States

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