Retail Shareholder Participation in the Proxy Process: Monitoring, Engagement, and Voting
66 Pages Posted: 14 Jun 2019
Date Written: May 15, 2019
This paper studies U.S. retail shareholder voting using a detailed sample of anonymized retail shareholder voting records over the period 2015-2017. We find that retail voters tend to vote more when the firm itself is smaller, when their ownership stake in the portfolio firm is higher and, consistent with informed choice, when the shareholder receives more information from the firm about the agenda. On the choice of how to vote, we find a positive association between retail shareholder support for management and recent performance, which is substantially greater than that for institutional investors. The association between retail shareholder support for management and ISS recommendations is lower than that for institutional investors. Small retail shareholders oppose management to a greater extent than do large retail shareholders, and retail shareholders in general oppose management more at small companies than large ones. Finally, we observe that, on average, voting support for ESG-related proposals is lower among large retail investors than institutional investors. Our results provide support for the idea that retail shareholders are an important force in firm voting, and that institutional voting differs substantially from retail shareholder voting. Thus, the voting choices of fund managers can be a poor proxy for the choices of their ultimate beneficiaries.
Keywords: Retail Voting, Shareholder Proposal, Proxy Contest, Corporate Governance
JEL Classification: G11, G18, G23, G34, G38
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