Voting Rationales
European Corporate Governance Institute – Finance Working Paper No. 928/2023
HKU Jockey Club Enterprise Sustainability Global Research Institute - Archive
87 Pages Posted: 29 Jul 2023 Last revised: 24 Oct 2024
Date Written: July 26, 2023
Abstract
Why do institutional investors vote the way they vote? Using a novel dataset on institutional investors' voting rationales, we provide direct evidence on the motivation for institutions' votes in director elections. The main reasons for opposition are lack of independence and diversity. Concerns raised in rationales reflect firms' governance weaknesses: companies with low board gender diversity receive more rationales on diversity, with similar results for independence, tenure, busyness, and CEO duality. Companies listen and change board composition in the direction stated in voting rationales. Results suggest many institutions make independent voting decisions with merits, and firms address investors' concerns.
Keywords: institutional investors, voting, voting rationales, corporate governance
JEL Classification: G11, G23, G30
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