All Shareholder Votes Are Not Created Equal

Do firm managers listen more to some shareholders than others? We show that directors facing the same level of dissent are twice as likely to leave the board when the dissent originates from active fund shareholders rather than passive ones. This phenomenon is driven by the stronger disciplinary threat posed by active funds rather than by any informational advantage. As a result, despite the large holdings of the "Big Three" passive asset managers, we find that their votes carry the same weight as those of an average active fund. Our findings highlight that shareholder democracy depends not only on the vote tally, but also on who casts the votes.