Management (of) Proposals
65 Pages Posted: 20 Apr 2018 Last revised: 20 Dec 2018
Date Written: December 19, 2018
Using shareholder voting records on management proposals for the period 2003--2015, we study whether the voting process is unbiased. We find evidence of vote manipulation by management. Specifically, the frequency of proposals that receive votes just above the threshold for passage is significantly greater than the frequency of proposals that do not pass. The strategic behavior by management is more pronounced for firms with low institutional ownership and less independent boards and for proposals receiving a negative ISS recommendation. We identify new mechanisms by which executives use their access to real-time vote information to influence the outcome, such as by adjourning a meeting and selective campaigning. Finally, our empirical results indicate that passage of a marginal management proposal does not create shareholder value. Using the theoretical framework, we show that this result implies that managerial influence on the voting process is value-destroying.
Keywords: Corporate Voting, Management Proposals, Shareholder Proposals, Short-Selling Constraints, Manipulation
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