Abstract
Using a novel dataset where institutional investors explain their votes—voting rationales—we provide direct evidence on the motivations behind votes against directors. Lack of independence and board diversity are the main stated reasons for opposing directors. These rationales accurately reflect firms’ governance characteristics rather than investors’ rationale-washing, suggesting that investors exercise voting discretion and exert more substantive effort than previously documented. Firms subsequently adjust board composition. Results are robust to alternative explanations, such as proxy advisors’ influence. Rather, voting rationales emerge as a direct communication channel, enabling firms to understand and address investors’ stated concerns.
© Roni Michaely, Silvina Rubio, Irene Yi, 2023
All rights reserved. Distributed for discussion purposes only; not to be reproduced without permission.
The views expressed are those of the author(s) and do not necessarily reflect those of ECGI or its members.
For copyright queries or takedown requests, contact wp@ecgi.org.
