Retail Shareholder Participation in the Proxy Process: Monitoring, Engagement, and Voting

We study retail shareholder voting using a nearly comprehensive sample of U.S. ownership and voting records. Analyzing turnout within a rational choice framework, we find that participation increases with ownership and expected benefits from winning and decreases with higher costs of participation. Even shareholders with negligible likelihood of affecting the outcome have non-zero turnout, consistent with consumption benefits from voting. Conditional on participation, retail shareholders punish the management of poorly performing firms. Overall, our evidence provides support for the idea that retail shareholders utilize their voting power to monitor firms and communicate with incumbent boards and managements.