Custom Proxy Voting Advice

Edwin Hu, Nadya Malenko and Jonathon Zytnick

No 19050, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies institutional investors’ decision-making using novel data from a major proxy advisor. We highlight the significant role of customized proxy advice in shaping shareholders’ voting decisions. About 80% of funds receive customized advice, and custom recommendations differ substantially from benchmark recommendations. We show that customization plays two key roles. First, it helps shareholders express their ideologies through the vote. Second, it facilitates shareholders’ decision-making process by reducing the need to pay attention to every proposal individually and enabling focus on the more important proposals. Customization thus influences both the aggregation of preferences and the aggregation of information in voting outcomes. Our findings offer a new perspective on the role of proxy advisors and suggest a shift away from solely focusing on benchmark recommendations.

Keywords: Proxy; voting (search for similar items in EconPapers)
JEL-codes: D72 G23 G34 G38 K22 (search for similar items in EconPapers)
Date: 2024-05
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Working Paper: Custom Proxy Voting Advice (2024)
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