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Managerial Reliance on the Retail Shareholder Vote: Evidence from Proxy Delivery Methods

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  • Choonsik Lee

    (College of Business, University of Rhode Island, Kingston, Rhode Island 02881)

  • Matthew E. Souther

    (Department of Finance, Darla Moore School of Business, University of South Carolina, Columbia, South Carolina 29208)

Abstract

Recent studies document the increasing effectiveness of shareholder voting as a monitoring mechanism. Because both directors and the market respond to shareholder votes, management has stronger incentives to influence voting outcomes. We identify one channel through which management can affect voting outcomes: increasing the turnout of (typically management-friendly) retail shareholders. Our study focuses on an observable managerial choice of how to deliver proxy materials to maximize retail turnout. Management can opt to send a full set of proxy materials to all shareholders, which increases retail turnout but also increases printing and mailing costs, or they can send a notice directing shareholders to proxy materials available online, which reduces costs but also decreases retail turnout. We find that managers are more likely to choose to deliver a full set of proxy materials when there are contentious items on the ballot for which they need additional voting support; and, indeed, the resulting support increases the likelihood that voting outcomes will align with management recommendations.

Suggested Citation

  • Choonsik Lee & Matthew E. Souther, 2020. "Managerial Reliance on the Retail Shareholder Vote: Evidence from Proxy Delivery Methods," Management Science, INFORMS, vol. 66(4), pages 1717-1736, April.
    • Handle: RePEc:inm:ormnsc:v:66:y:2020:i:4:p:1717-1736
    DOI: 10.1287/mnsc.2018.3260
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    Cited by:

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    2. Lin, Xiaowei & Huang, Hung-Yi & Lee, Yun-Chi, 2023. "Proxy solicitation, ownership structure, and bank cash dividends," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 15-23.
    3. Chung, Kee H. & Lee, Choonsik, 2020. "Voting methods for director election, monitoring costs, and institutional ownership," Journal of Banking & Finance, Elsevier, vol. 113(C).
    4. Lee, Eugenia Y. & Ha, Wonsuk, 2023. "Electronic voting in shareholder meetings and the market value of cash holdings," International Review of Financial Analysis, Elsevier, vol. 89(C).
    5. Lee, Choonsik, 2021. "Mitigating information imperfections in proxy contests: The effect of dissidents' proxy solicitation," Journal of Corporate Finance, Elsevier, vol. 69(C).

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