Voting in Shareholders Meetings

62 Pages Posted: 14 Jul 2021

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 focus on the case in which the management does not affect the proposal being voted on. We prove that, for any distribution of shareholdings, the one-share-one-vote mechanism (1S1V) dominates the one-person-one-vote mechanism (1P1V), independently of whether or how shareholdings correlate with information accuracy. We also show that 1S1V becomes efficient only if votes are fully divisible. 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-off between selection and voting efficiency underlying the comparison of 1S1V and 1P1V: the higher voting efficiency of 1S1V 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 1S1V.

JEL Classification: D72, G3

Suggested Citation

Bouton, Laurent and Llorente-Saguer, Aniol and Macé, Antonin and Xefteris, Dimitrios, Voting in Shareholders Meetings (July 2021). CEPR Discussion Paper No. DP16336, Available at SSRN: https://ssrn.com/abstract=3886822

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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