Voting in Shareholders Meetings

60 Pages Posted: 12 Jul 2021 Last revised: 3 Apr 2022

See all articles by Laurent Bouton

Laurent Bouton

Georgetown University - Department of Economics

Aniol Llorente-Saguer

Queen Mary University of London

Antonin Macé

Paris School of Economics, CNRS and ENS

Dimitrios Xefteris

University of Cyprus

Multiple version iconThere are 2 versions of this paper

Date Written: July 2021

Abstract

This paper studies voting in shareholders meetings. We focus on the informational efficiency of different voting mechanisms, taking into account that they affect both management’s incentives before the meeting and shareholders’ decisions at the meeting. We first deal with the case in which the management does not affect the proposal being voted on. We show that, for any distribution of shareholdings and any informational asymmetry among shareholders, a voting mechanism with a richer ballot space dominates a voting mechanism with a poorer one. We then show that efficiency requires full divisibility of the votes. Second, we consider the case in which the management decides whether to put the proposal to a vote. The properties of a voting mechanism then depend both on its voting efficiency and on how it affects managers’ incentives to select good proposals. We uncover a trade-o¤ between selection and voting efficiency underlying the comparison of voting mechanisms: the higher voting efficiency of mechanisms with richer ballot space implies worse selection incentives. In some cases, the negative effect of worse selection incentives on shareholders’ welfare can be large enough to wash out the higher voting efficiency of even the most efficient mechanism.

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Suggested Citation

Bouton, Laurent and Llorente-Saguer, Aniol and Macé, Antonin and Xefteris, Dimitrios, Voting in Shareholders Meetings (July 2021). NBER Working Paper No. w29005, Available at SSRN: https://ssrn.com/abstract=3884699

Laurent Bouton (Contact Author)

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States

Aniol Llorente-Saguer

Queen Mary University of London ( email )

Lincoln's Inn Fields
Mile End Rd.
London, E1 4NS
United Kingdom

HOME PAGE: http://https://sites.google.com/site/aniollls/

Antonin Macé

Paris School of Economics, CNRS and ENS ( email )

France

HOME PAGE: http://https://sites.google.com/site/antoninmace/home

Dimitrios Xefteris

University of Cyprus ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus

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