Management (of) Proposals

Authors:

Ilona Babenko

Arizona State University

Goeun Choi

Tulane University - A.B. Freeman School of Business

Rik Sen

University of New South Wales (UNSW)

Abstract

Using shareholder voting records on management proposals, we find evidence of systematic managerial influence on outcomes of close votes. This behavior is more pronounced for firms with low institutional ownership and for proposals receiving a negative ISS recommendation. Approximately 65% of management proposals headed for a narrow defeat have their outcome altered. We identify new mechanisms by which managers influence the outcome, such as meeting adjournment and selective campaigning. The market reacts positively to the failure of management proposals. Combined with our theoretical model, these results suggest that managerial influence on the voting process is value-destroying.