Robo-Voting: Does Delegated Proxy Voting Pose a Challenge for Shareholder Democracy?

Abstract

Robo-voting is the practice by an investment fund of mechanically voting according to the advice of its proxy advisor in corporate elections, in effect fully delegating its voting decision to its advisor. We examine over 65 million votes cast during the period 2008-2021 by 14,582 mutual funds to describe and quantify the prevalence of robo-voting. Overall, 33 percent of mutual funds robo-voted in 2021; 22 percent with ISS, 4 percent with Glass Lewis, and 6 percent with management. The fraction of funds that robo-voted increased until around 2013 and then stabilized at the current level. Despite the sizeable number of funds that robo-voted, robo-voters controlled only about 1.5 percent of shares on average in recent corporate elections because robo-voters tend to be smaller than other funds. Overall the evidence suggests that robo-voting is more prevalent than its defenders suggest, but may exert less influence on corporate governance than its critics suspect.

Keywords: Corporate governance, proxy voting, robo-voting, proxy advisor, shareholder democracy

JEL Classification: G3, K22