All Shareholder Votes Are Not Created Equal

Firms listen to some shareholders more than others. We show that a director's retention is more than twice as sensitive to dissent from active funds as to dissent from passive funds. A model decomposes this difference into two candidate channels, an exit threat and an information advantage. Empirically, we find support for the exit-threat channel and no support for the information channel. Despite their large stakes, "Big Three" passive funds sway boards no more than active funds outside the Big Three. Shareholder influence depends not only on the number of shares voted, but also on who casts the vote.