Decentralizing Voting Power

The stewardship structure of investment funds typically involves fund managers, proxy advisors, or centralized groups, who determine proxy votes. Exploiting a voting-decentralization policy change at Vanguard, we examine how within-fund variation in stewardship structure affects voting outcomes. We find considerable disagreement – the newly enfranchised fund managers both oppose management recommendations more frequently and support shareholder proposals at a significantly higher rate than the stewardship group. Further, most of the fund managers vote actively and independently, rather than following proxy advisor recommendations. Our results have important policy implications regarding fund stewardship, shareholder democracy, regulation, and the role of proxy advisors.