Power to the People: Voting Behavior at Shareholders' Meeting — An Experimental Study

28 Pages Posted: 17 Apr 2019

See all articles by Efrat Dressler

Efrat Dressler

University of Pennsylvania - The Wharton School; The Hebrew University of Jerusalem

Date Written: December 2, 2018

Abstract

Voting in shareholder meetings has become a popular mechanism of corporate governance throughout the world, and shareholders’ main tool for communicating with the company’s management. A variety of factors have been shown in the behavioral economic literature to affect voters’ behavior, including outcome preferences, other voters’ position (peer effect), non-consequentialist elements such as social norms or inequality aversion, and self-interest. It is argued here that voters’ behavior may also be affected by their probability to determine the outcome (henceforth, “voting power”). The effect of voting power on voting behavior is examined in an experimental study that controls for several motivations that have been demonstrated previously to impact voting. The participants’ power to affect the outcome was manipulated exogenously. Findings suggest that voting power nudged participants to oppose management and to choose the “right” alternative, that is, to vote against a proposal which does not serve the company's best interest. This effect emerged even when participants’ vote was in opposition to all their peers and to their own self-interest. The results might allow for some optimism regarding recent regulatory changes in Israel that reallocated voting power among shareholders.

Keywords: Voting Power, Voting Behavior, Shareholder Voting, Experimental Finance

JEL Classification: G02, G30, G38

Suggested Citation

Dressler, Efrat, Power to the People: Voting Behavior at Shareholders' Meeting — An Experimental Study (December 2, 2018). Available at SSRN: https://ssrn.com/abstract=3361796 or http://dx.doi.org/10.2139/ssrn.3361796

Efrat Dressler (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

The Hebrew University of Jerusalem ( email )

Mount Scopus
Jerusalem, IL Jerusalem 91905
Israel

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