Creating controversy in proxy voting advice

Andrey Malenko, Nadya Malenko and Chester Spatt

No 16352, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyze how a profit-maximizing proxy advisor designs vote recommendations and research reports. The advisor benefits from producing informative, unbiased reports, but only partially informative recommendations, biased against the a priori likely alternative. Such recommendations induce close votes, increasing controversy, and thereby the relevance and value of proxy advice. Our results suggest shifting from an exclusive emphasis on recommendations, highlighting the importance of both reports and recommendations in proxy advisors' information provision. They rationalize the one-size-fits-all approach and help reinterpret empirical patterns of voting behavior, suggesting that proxy advisors' recommendations may not be a suitable benchmark for evaluating shareholders' votes.

Keywords: Proxy advisor; Voting; Sale of information; Information design; Bayesian persuasion; Corporate governance (search for similar items in EconPapers)
JEL-codes: D72 D82 D83 G34 K22 (search for similar items in EconPapers)
Date: 2022-05
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Working Paper: Creating Controversy in Proxy Voting Advice (2021)
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