Retail Shareholder Participation in the Proxy Process: Monitoring, Engagement, and Voting

85 Pages Posted: 14 Jun 2019 Last revised: 9 Dec 2019

See all articles by Alon Brav

Alon Brav

Duke University - Fuqua School of Business

Matthew D. Cain

Berkeley Center for Law and Business

Jonathon Zytnick

Columbia University; New York University School of Law

Date Written: November 6, 2019

Abstract

We study retail shareholder voting using a detailed and nearly universal sample of anonymized
retail shareholder voting records over the period 2015-2017. Contrary to public perception, we
find that retail shareholders are an influential voting bloc, affecting as many proposal outcomes as
the Big Three asset management firms despite lower voting participation and less uniform
voting. Consistent with a monitoring role, retail voters are more likely to turn out for the securities
in their portfolio that have underperformed, for ballots that include contested proposals, and for
firms comprising the largest stakes in their portfolio. Retail shareholders with large stock portfolios
and low opportunity costs are most likely to turn out. In regards to retail voting decisions, we find
high sensitivity to recent poor performance, but far lower sensitivity to ISS recommendations than
that of large mutual funds. Retail shareholders can be divided into two blocs. The first are highly
influential large stakeholders, who turn out at high rates and strongly oppose shareholder
proposals. The second are the more populous small stakeholders, who turn out at lower rates and
show higher support for shareholder proposals. Retail shareholders are more influential at smaller
firms, where they hold a larger proportionate share, their turnout is higher, and their support for
management is lower. Our evidence provides support for the idea that retail shareholders can and
do utilize their voting power as a means to monitor firms and communicate with incumbent boards
and managements.

Keywords: Retail Voting, Shareholder Proposal, Proxy Advisory Firm, Corporate Governance

JEL Classification: G11, G18, G23, G34, G38

Suggested Citation

Brav, Alon and Cain, Matthew D. and Zytnick, Jonathon, Retail Shareholder Participation in the Proxy Process: Monitoring, Engagement, and Voting (November 6, 2019). European Corporate Governance Institute – Finance Working Paper No. 637/2019. Available at SSRN: https://ssrn.com/abstract=3387659 or http://dx.doi.org/10.2139/ssrn.3387659

Alon Brav

Duke University - Fuqua School of Business ( email )

100 Fuqua Drive
Durham, NC 27708-0120
United States
919-660-2908 (Phone)
919-684-2818 (Fax)

Matthew D. Cain

Berkeley Center for Law and Business ( email )

215 Boalt Hall
Berkeley, CA 94720-7200
United States

Jonathon Zytnick (Contact Author)

Columbia University ( email )

420 W. 118th Street, MC 3308
New York, NY 10027
United States

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

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