Voting on Public Goods: Citizens vs Shareholders

Robin Döttling, Doron Y. Levit, Nadya Malenko and Magdalena A. Rola-Janicka

No 32605, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the interplay between a “one person-one vote” political system and a “one share-one vote” corporate governance regime. If shareholders push firms for more pro-social policies, political backlash may arise, undoing ESG initiatives. In a frictionless economy, shareholder democracy becomes irrelevant: the political system fully offsets shareholder influence. With public policy frictions, pro-social corporations can mitigate regulatory shortcomings and enhance corporate public goods provision. Nevertheless, shareholder democracy can hurt citizens due to the representation problem: it favors the preferences of the wealthy. Investor diversification, pass-through voting, and lobbying have important implications for these trade-offs of shareholder democracy.

JEL-codes: D62 D72 G28 G34 H23 (search for similar items in EconPapers)
Date: 2024-06
New Economics Papers: this item is included in nep-cdm, nep-pol and nep-pub
Note: CF EEE PE POL
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Citations: View citations in EconPapers (2)

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Working Paper: Voting on Public Goods: Citizens vs. Shareholders (2024)
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