Management Always Wins the Close Ones

While much has been made of "shareholder democracy" as a lever of corporate governance, there is little evidence about the efficacy of voting. This paper empirically examines votes on management-sponsored resolutions and finds widespread irregularities in the distribution of votes received by management. Management is overwhelmingly more likely to win votes by a small margin than lose by a small margin. The results indicate that, at some point in the voting process, management obtains highly accurate information about the likely voting outcome and, based on that information, acts to influence the vote. The precise point at which this occurs is unclear, though it is likely to be near the "poll-closing" time. Whatever the cause of management's advantage, it is clear that shareholder voting does not constitute a "representative" direct democracy. Copyright 2008, Oxford University Press.

Corporate Voting versus Market Price Setting

This paper examines the relation between two means of corporate information aggregation---corporate voting and stock market pricing. If the median voter and the price-setting shareholder share similar information, then close proxy contest outcomes should not have systematic effects on stock prices. The paper shows, however, that close dissident victories cause positive movements in stock prices, while close management victories lead to negative price effects. The median voter values management control more than the price-setting shareholder. Voting and market pricing aggregate information in very different ways, with important implications for the role of voting and market pricing in corporate law. Copyright 2009, Oxford University Press.