When Two Experts Are Better Than One: The Example of Shareholder Voting

52 Pages Posted: 1 Jun 2022 Last revised: 22 Apr 2024

See all articles by Berno Buechel

Berno Buechel

University of Fribourg - Faculty of Economics and Social Science

Lydia Mechtenberg

University of Hamburg

Alexander F. Wagner

University of Zurich - Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Date Written: April 16, 2024

Abstract

Introducing a single expert's advice before a vote can diminish its informational efficiency. We show that when two independent experts are involved, the opposite occurs: informational efficiency increases. We model expert advice, individual information acquisition, and voting in common-interest scenarios, using proxy advice and shareholder voting as the primary example. Adding a second expert enhances decision quality under two plausible assumptions: the first expert holds superior information compared to individual voters, and the second expert's advice is timely. When the second expert challenges the first's proposal, voters are prompted to conduct their own inquiries, resulting in better-informed decisions and reducing the likelihood of correlated errors. These findings hold implications for collective decision-making across various organizational settings.

Keywords: Proxy advisors, strategic voting

JEL Classification: G23, D72, D83

Suggested Citation

Buechel, Berno and Mechtenberg, Lydia and Wagner, Alexander F., When Two Experts Are Better Than One: The Example of Shareholder Voting (April 16, 2024). Swiss Finance Institute Research Paper No. 22-47, European Corporate Governance Institute – Finance Working Paper No. 832/2022, Available at SSRN: https://ssrn.com/abstract=4123989 or http://dx.doi.org/10.2139/ssrn.4123989

Berno Buechel

University of Fribourg - Faculty of Economics and Social Science ( email )

Fribourg, CH 1700
Switzerland

Lydia Mechtenberg

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

Alexander F. Wagner (Contact Author)

University of Zurich - Department of Finance ( email )

Plattenstr 32
Zurich, 8032
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Swiss Finance Institute ( email )

Switzerland

HOME PAGE: http://www.alex-wagner.com

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