Does Proxy Advice Allow Funds to Cast Informed Votes?

45 Pages Posted: 15 Jun 2021 Last revised: 25 Oct 2022

See all articles by John G. Matsusaka

John G. Matsusaka

University of Southern California - Marshall School of Business; USC Gould School of Law

Chong Shu

University of Utah - David Eccles School of Business

Date Written: October 25, 2022

Abstract

This paper investigates if proxy advice leads mutual funds to vote as if they had acquired information on their own. We find, for the period 2004-2017, that advice from Glass Lewis typically moved fund voting in the same direction as self-information, while advice from ISS led funds to vote in the opposite direction. A vote was “self-informed” vote if the fund visited and downloaded information about a company from the SEC’s Edgar website before voting. A fund’s proxy advisor is identified from the format of its regulatory filing. We also find that ISS advice typically made funds more likely to support outcomes preferred by socially responsible investors. We suggest that ISS may have slanted its recommendations in response to pressure from socially responsible investors that wanted to influence ISS’s robo-voting customers.

Keywords: Proxy voting, proxy advice, corporate governance, shareholder rights

JEL Classification: G3, G34, K22

Suggested Citation

Matsusaka, John G. and Shu, Chong, Does Proxy Advice Allow Funds to Cast Informed Votes? (October 25, 2022). USC CLASS Research Paper No. CLASS21-37, USC Law Legal Studies Paper No. 21-37, USC Marshall School of Business Research Paper Sponsored by iORB, No. Forthcoming, Available at SSRN: https://ssrn.com/abstract=3866041 or http://dx.doi.org/10.2139/ssrn.3866041

John G. Matsusaka (Contact Author)

University of Southern California - Marshall School of Business ( email )

Department of Finance & Business Economics
Los Angeles, CA 90089
United States
213-740-6495 (Phone)
213-740-6650 (Fax)

USC Gould School of Law

699 Exposition Boulevard
Los Angeles, CA 90089
United States
213-740-6495 (Phone)

Chong Shu

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

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