Which Firms Require More Governance? Evidence from Mutual Funds' Revealed Preferences

Measuring which firms most need governance reform is difficult: raw vote support reflects only the preferences of a firm's current owners. Using fund votes on shareholder proposals, this paper develops firm-level rankings that infer the mutual fund community's collective assessment of firms' governance needs, accounting for selective ownership. The rankings diverge from raw vote support in ways linked to ownership structure. Firms whose ownership structures materially suppress vote support below this collective assessment experience more shareholder engagement and escalation within three years, showing that the rankings capture forward-looking information that raw votes obscure.