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

66 Pages Posted: 14 Jun 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: May 15, 2019

Abstract

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

Suggested Citation

Brav, Alon and Cain, Matthew D. and Zytnick, Jonathon, Retail Shareholder Participation in the Proxy Process: Monitoring, Engagement, and Voting (May 15, 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 )

Box 90120
Durham, NC 27708-0120
United States
919-660-2908 (Phone)
919-684-2818 (Fax)

Matthew D. Cain (Contact Author)

Berkeley Center for Law and Business ( email )

215 Boalt Hall
Berkeley, CA 94720-7200
United States

Jonathon Zytnick

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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