Decentralizing Proxy Voting Power

Abstract

Asset managers have been transferring proxy voting rights from their centralized stewardship groups to fund managers and fund shareholders. Analyzing Vanguard’s 2019 change in voting policy, we find considerable disagreement between the decentralized voters and Vanguard’s stewardship group. The decentralized voters more often oppose management recommendations and, in contrast to some viewpoints, they cast increased votes supporting shareholder ESG-related proposals, including climate-related proposals, particularly at high-emitting firms. Finally, substantially more of the new voters become active, independent voters, than rely on proxy advisor recommendations. Our results have important policy implications regarding shareholder democracy, regulation, climate finance, and proxy advisers.

Keywords: Governance, Climate finance, ESG, Pass-through voting, Proxy voting, Shareholder democracy, Proxy advisory firms, Voting choice, Voting