Errors in Shareholder Voting
84 Pages Posted: 25 Oct 2021 Last revised: 12 Aug 2023
Date Written: August 10, 2023
We develop a structural empirical framework to study voting outcomes and the role of proxy advisors for shareholder proposals. Voting errors occur when bad proposals pass (false positives) and good proposals fail (false negatives). 6.5% of voting outcomes for shareholder proposals are mistakes, the majority being false positives. Recommendations by proxy advisor ISS are incorrect roughly half the time. ISS makes more mistakes when they support proposals (70%), but investors rely less on those recommendations than when ISS is not in favor. Errors in voting outcomes are more sensitive to proxy advisor informativeness and influence than to proposal quality.
Keywords: shareholder voting, shareholder proposals, proxy advice, informed voting
JEL Classification: G30
Suggested Citation: Suggested Citation