Busy Season and Proxy Recommendations
52 Pages Posted: 5 Mar 2021
Date Written: January 27, 2021
The short period of time, from the fourth week of April to the end of May, referred to as the proxy season, has about 333 proposals voted a day relative to 27 proposals voted per day outside the proxy season. The compressed workload results in 17.6% fewer negative recommendations from ISS during this busy period. The proxy season also entails busy voting schedules for institutional investors who in the aggregate, respond by increasing their reliance on ISS recommendations. Aggregate support for proposals with a negative recommendation from ISS is 10% lower during the busy period. Stock price reaction to outcomes in close votes show that successful negative recommendations during the busy period, that is when negative proposals fail, are not value enhancing. In sum, ISS recommendations during busy voting periods are less likely to be negative, have greater influence on voting, and are not value enhancing. The results inform the policy debate on the role and influence of proxy advisors.
Keywords: Proxy Advisors, ISS, Proxy Season, Proxy Voting
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