Hidden Agendas in Shareholder Voting

52 Pages Posted: 3 May 2021 Last revised: 10 Jun 2022

See all articles by Scott Hirst

Scott Hirst

Boston University - School of Law; Harvard Law School Program on Corporate Governance

Adriana Robertson

University of Chicago Law School

Date Written: April 23, 2021

Abstract

Nothing in either corporate or securities law requires companies to notify investors what they will be voting on before the record date for the meeting. We show that, overwhelmingly, they do not. The result is "hidden agendas:" in 88% of shareholder votes, investors cannot find out what they will be voting on before the record date. This poses an especially serious problem for investors who engage in securities lending: they must decide whether the expected benefit of voting exceeds the expected benefit of continuing to lend their shares (or making them available for lending) without knowing what they will be voting on. All investors who engage in share lending are affected, but the problem is particularly acute for large investment managers that have fiduciary duties related to voting. At present, they must discharge these duties in the dark.

We propose a straightforward solution: an amendment to the Securities and Exchange Commission’s proxy rules requiring public companies to file proxy statements at least five days before the record date for the meeting. This simple change would give investors the information they need to make an informed decision about whether to retain the right to vote or not. If we believe that shareholder voting is important, and that investment managers and others should decide whether to vote, we should give them the information they need to do so.

Keywords: hidden agendas, securities lending, shareholder voting, proxy statements, record dates, corporate law, securities law, institutional investors, fiduciary duties

JEL Classification: G23, G34, K22

Suggested Citation

Hirst, Scott and Robertson, Adriana, Hidden Agendas in Shareholder Voting (April 23, 2021). 39 Yale Journal on Regulation (Forthcoming, 2022), Available at SSRN: https://ssrn.com/abstract=3833304 or http://dx.doi.org/10.2139/ssrn.3833304

Scott Hirst (Contact Author)

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Harvard Law School Program on Corporate Governance ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

Adriana Robertson

University of Chicago Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

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