Custom Proxy Voting Advice

This paper studies institutional investors’ decision-making using novel data from a major proxy advisor. While prior literature has focused exclusively on benchmark recommendations, we highlight the significant role of custom recommendations in shaping shareholder votes: 80% of funds receive customized advice, and custom recommendations differ substantially from benchmark ones. Combining a theoretical framework with data on customization and voting behavior, we show that customization plays two key roles. First, it helps shareholders express their ideologies through voting. Second, it reallocates investors’ attention, reducing the need to pay attention to each individual proposal and enabling focus on the most important ones.