The Role of Public Pension Funds in Corporate Governance: Evidence from Proxy Voting
48 Pages Posted: 21 Sep 2018
Date Written: September 20, 2018
Public pension funds argue that proxy voting is a primary method of governing companies for them. This paper examines their proxy voting behavior and documents several important determinants. Compared to institutional investors with greater business ties with portfolio firms (e.g., mutual funds), public pension funds are more inclined to vote in favor of (against) shareholder (management) proposals. They support their fellow public pension funds’ and labor unions’ proposals the most and individual investors’ proposals the least. Although more supportive than mutual funds, public pension funds support socially responsible proposals to a lesser degree than other types of shareholder proposals. Public pension funds are more willing to vote against management proposals for firms headquartered in their home state. Funds active in filing shareholder proposals are more likely to vote against (in favor of) management (shareholder) proposals, so are funds from states with strong democratic legislators and public unions. Finally, public pension funds’ votes are important to the voting outcomes of both management and shareholder proposals.
Keywords: public pension funds; proxy voting; corporate governance
JEL Classification: G23; G34
Suggested Citation: Suggested Citation