The Regulation of Shareholder Democracy

We study how investors, managers, and firms responded to an unexpected change in SEC proxy guidelines expanding shareholders' ability to bring climate-related proposals to a vote. High-carbon-emitting firms experienced −1.6 percent abnormal returns following the announcement, yet showed no evidence of reduced actual or pledged emissions, reduced toxic releases, or increased clean-technology investment. These firms increased engagement with sponsors and stakeholders, consistent with managerial distraction, though estimated costs appear too small to explain the value loss. The absence of real effects, with evidence on policy expectations, suggests investors interpreted the change as signaling unfavorable future environmental policy, beyond proposal rights.