On the Road to Better Governance: Private Meetings and Mutual Fund Voting

Abstract

We study whether private interactions between firms and mutual funds during non-deal roadshows (NDRs) influence governance behavior. Funds headquartered in the city where the firm conducts an NDR are more likely to download proxy statements. They are also more likely to vote with management on contentious proposals, and their voting is perceived by the market as value increasing, particularly when ISS issues "one-size-fits-all" recommendations. Further, high aggregate NDR ownership is associated with a smaller proportion of contentious proposals where management issues value-destroying recommendations. Collectively, the evidence is consistent with "behind-the-scenes" engagement between firms and investors resulting in improved governance outcomes.

Keywords: Mutual fund voting, private meetings, non-deal roadshows, corporate governance, ISS