Doing the Right Thing? The Voting Power Effect and Institutional Shareholder Voting.
ABSTRACT: Through a combination of a controlled experiment and a survey, we examine the effect of voting power on shareholders' voting behavior at general meetings. To avoid a selection bias, common in archival voting data, we exogenously manipulate shareholders' power to affect the outcome. Our findings suggest that, when it comes to corporate decisions involving conflicts of interest, voting power nudges shareholders to oppose management and to choose the "right" alternative, that is, vote against a proposal which prima facie does not serve the company's best interest. This effect obtained even when the dissenting vote contravened the choices of all other voters. Furthermore, the drive "to do the right thing" was established as significant, above and beyond the size of the economic stake. We also demonstrate that strategic voting among institutional investors is contingent on voting power: when in a position to affect the outcome of a vote, institutional investors tend to eschew strategic considerations and display fewer consistent patterns in their voting, compared to situations in which their ability to make a difference is limited. In anticipation of a "bad" proposal to be put to vote at the general shareholder meeting, institutional investors prefer to negotiate terms with management beforehand, and vote against it only after such negotiations fail. Our results shed new light on the "behind the scenes" processes in shareholder voting and underscore the importance of institutional investor agency to corporate governance, accountability, and minority shareholder representation.
The online version contains supplementary material available at 10.1007/s10551-022-05108-y.
Project description:We analyze the connectivity of equity investments to the firms in the global ownership network that are reported as non-compliant with Environment, Social, and Government (ESG) benchmarks. We find that a large number of shareholders have ownership linkages to non-ESG firms, most commonly with three or four degrees of separation. Analyzing the betweenness centrality for shareholders connecting the ultimate owners and non-ESG firms, we find that the investment management companies play important roles in channeling the investment money into non-ESG firms, where largest American asset managers commonly have one to two degrees of separation on their ownership linkages to those problematic firms. Since asset managers collect capital from investors by running the equity funds, we analyze the ownership stakes and the associated voting rights attributable to the equity funds investors. We estimate the distribution of the power of corporate control over non-ESG firms among specific asset managers (such as BlackRock and Fidelity) and among different types of the equity funds (such as mutual funds and exchanged-traded funds), and explores how investing in the equity funds rather than ownership investing may have shifted the distribution of the power to control those non-ESG firms.
Project description:New democracies go to great lengths to implement institutional protections of the electoral process. However, in this paper we present evidence that shows that even in the United States-where the secret ballot has been in place for generations-doubts about the secrecy of the voting process are surprisingly prevalent. Many say that their cast ballot can be matched to their name or that others could observe their vote choices while they were voting. We find that people who have not previously voted are particularly likely to harbor doubts about the secrecy of voters' ballots. Those who vote by mail in the privacy of their own homes also feel that others are able to discover their vote choices. Taken together, these findings suggest an important divergence between public perceptions about and the institutional status of the secret ballot in the United States, a divergence that may affect patterns of voting behavior and political participation.
Project description:<h4>Introduction</h4> Responsible investment (RI), in which environmental, social and governance (ESG) considerations are incorporated into investment decision making, is a potentially powerful tool for increasing corporate accountability and improving corporate practices to address broad societal challenges. Whilst the RI sector is growing, there is limited understanding of the extent to which pressing social issues, such as obesity and unhealthy population diets, are incorporated within RI decision making. This study aimed to investigate the extent to which obesity prevention and population nutrition are considered by Australian institutional investors engaged in responsible investment. <h4>Methods</h4> A desk-based review was conducted of investment approaches of prominent Australian asset managers and superannuation funds identified as engaged in responsible investment. Relevant information on the incorporation of ESG issues related to obesity and population nutrition was extracted for each investor, drawing on websites, published policy documents and annual reports. Strategies were categorized as: (1) negative/exclusionary screening; (2) positive/best-in-class screening; (3) norms-based screening; (4) ESG integration; (5) sustainability-themed investing; (6) impact/community investing; and (7) corporate engagement and shareholder action. These strategies were compared across investors and by themes related to obesity and population nutrition. <h4>Results</h4> Eighteen of the 35 investors indicated that they applied investment strategies that considered issues related to obesity and population nutrition. The most commonly identified strategy was ESG integration (n = 12), followed by sustainability-themed investing (n = 6), and positive screening (n = 4). The ways in which obesity and population nutrition were considered as part of these approaches included relatively high-level general health considerations (n = 12), considerations around the healthiness of food company product portfolios (n = 10), and consideration of specific company nutrition policies and practices (n = 4). The specificity and depth to which RI strategies were disclosed varied. <h4>Conclusion</h4> There is significant potential for investment decisions to contribute to efforts to address key social issues, such as obesity and unhealthy diets. Some institutional investors in Australia have recognized the potential importance of incorporating obesity- and population nutrition-related issues into decision-making processes. However, the extent to which these considerations translate into investment decisions and their impact on companies in the food sector warrant further exploration.
Project description:This article reports new empirical evidence on probabilistic polling, which asks persons to state in percent-chance terms the likelihood that they will vote and for whom. Before the 2008 presidential election, seven waves of probabilistic questions were administered biweekly to participants in the American Life Panel (ALP). Actual voting behavior was reported after the election. We find that responses to the verbal and probabilistic questions are well-aligned ordinally. Moreover, the probabilistic responses predict voting behavior beyond what is possible using verbal responses alone. The probabilistic responses have more predictive power in early August, and the verbal responses have more power in late October. However, throughout the sample period, one can predict voting behavior better using both types of responses than either one alone. Studying the longitudinal pattern of responses, we segment respondents into those who are consistently pro-Obama, consistently anti-Obama, and undecided/vacillators. Membership in the consistently pro- or anti-Obama group is an almost perfect predictor of actual voting behavior, while the undecided/vacillators group has more nuanced voting behavior. We find that treating the ALP as a panel improves predictive power: current and previous polling responses together provide more predictive power than do current responses alone.
Project description:Guiding institutional investors to actively participate in corporate governance is a hot issue to improve the internal governance of China's listed companies. This study seeks to provide a comprehensive understanding of the mechanism that underlies the governance effects of the heterogeneity of institutional investors on the cost of capital, and the influence of ownership structure on the relationship between them. Using an unbalanced panel data on A-share listed companies of Shanghai and Shenzhen in China's capital market during the 2014-2019 period, this study reveals how institutional investors with longer holding period and higher shareholding ratio are negatively associated with the cost of capital in China's capital market. Furthermore, this study successfully confirms the moderating effect of ownership structure in the relationship between institutional investors and the cost of capital. China's state-owned enterprises are more likely to introduce improvements at the corporate governance level, and ownership concentration weakens the negative influence of institutional investors on the cost of capital. The research contributes to a deeper understanding of the impacts of institutional investor's heterogeneity and ownership structure on the cost of capital in China. In the process, the study yields useful implications for the theory and practice of corporate governance.
Project description:<h4>Background</h4>Many of the harms created by the global soft drink industry that directly influence human and planetary health are well documented. However, some of the ways in which the industry indirectly affects population health, via various socio-economic pathways, have received less attention. This paper aimed to analyse the extent to which market power and corporate wealth and income distribution in the global soft drink market negatively impact public health and health equity. In doing so, the paper sought to contribute to the development of a broad-based public health approach to market analysis. A range of dimensions (e.g., market concentration; financial performance; corporate wealth and income distribution) and indicators (e.g., Herfindahl Hirschman Index; earnings relative to the industry average; effective tax rates; and shareholder value ratios) were descriptively analysed. Empirical focus was placed on the two dominant global soft drink manufacturers.<h4>Results</h4>Coca-Cola Co, and, to a lesser extent, PepsiCo, operate across an extensive patchwork of highly concentrated markets. Both corporations control vast amounts of wealth and resources, and are able to allocate relatively large amounts of money to potentially harmful practices, such as extensive marketing of unhealthy products. Over recent decades, the proportion of wealth and income transferred by these firms to their shareholders has increased substantially; whereas the proportion of wealth and income redistributed by these two firms to the public via income taxes has considerably decreased. Meanwhile, the distribution of soft drink consumption is becoming increasingly skewed towards population groups in low and middle-income countries (LMICs).<h4>Conclusions</h4>Market power and corporate wealth and income distribution in the global soft drink market likely compound the market's maldistribution of harms, and indirectly influence health by contributing to social and economic inequalities. Indeed, a 'double burden of maldistribution' pattern can be seen, wherein the wealth of the shareholders of the market's dominant corporations, a group over-represented by a small and wealthy elite, is maximised largely at the expense of the welfare of LMICs and lower socioeconomic groups in high-income countries. If this pattern continues, the appropriate role of the global soft drink market as part of sustainable economic development will require rethinking.
Project description:<h4>Background</h4>Who benefits from the commercial biomedical research and development (R&D)? Patients-consumers and investors-shareholders have traditionally been viewed as two distinct groups with conflicting interests: shareholders seek maximum profits, patients - maximum clinical benefit. However, what happens when patients are the shareholders? With billions of dollars of public risk capital channeled into the drug development industry, analysing the complex financial architecture and the market for corporate control is essential for understanding industry's characteristics, such as pricing strategies or R&D priorities.<h4>Results</h4>Adding investments by governmentally-mandated retirement schemes, central and promotional banks, and sovereign wealth funds to tax-derived governmental financing shows that the majority of biomedical R&D funding is public in origin. Despite this, even in the high-income countries patients can be denied access to effective treatments due to their high cost. Since these costs are set by the drug development firms that are owned in substantial part by the retirement accounts of said patients, the complex financial architecture of biomedical R&D may be inconsistent with the objectives of the ultimate beneficiaries.<h4>Conclusions</h4>The divergence in economic and public health performance of the drug development industry is resultant from its financial underwriting by enormously expanded pension schemes, governmentally mandated to represent the interests of "captive" beneficiaries, as well as similar policymaker-designed funding flows, whose standards of transparency, accountability and representation are substantially lower than that of governments themselves. Strengthening those elements of institutional design and thus ensuring active responsible shareholding in the interest of the patients-savers is an under-utilised, but potentially high-impact opportunity for advancing public health.
Project description:Online votes or ratings can assist internet users in evaluating the credibility and appeal of the information which they encounter. For example, aggregator websites such as Reddit allow users to up-vote submitted content to make it more prominent, and down-vote content to make it less prominent. Here we argue that decisions over what to up- or down-vote may be guided by evolved features of human cognition. We predict that internet users should be more likely to up-vote content that others have also up-voted (social influence), content that has been submitted by particularly liked or respected users (model-based bias), content that constitutes evolutionarily salient or relevant information (content bias), and content that follows group norms and, in particular, prosocial norms. 489 respondents from the online social voting community Reddit rated the extent to which they felt different traits influenced their voting. Statistical analyses confirmed that norm-following and prosociality, as well as various content biases such as emotional content and originality, were rated as important motivators of voting. Social influence had a smaller effect than expected, while attitudes towards the submitter had little effect. This exploratory empirical investigation suggests that online voting communities can provide an important test-bed for evolutionary theories of human social information use, and that evolved features of human cognition may guide online behaviour just as it guides behaviour in the offline world.
Project description:This article contains firm-level data on 1) aggregated corporate governance score, and 2) financial data for the period 2010-2017. The study includes 626 companies from 6 Asian countries: China, India, Indonesia, Japan, South Korea and Thailand. Aggregated corporate governance score is calculated using 13 firm-level attributes: board size, board independence, CEO duality, board meeting attendance, independence of audit committee, auditor ratification, independence of compensation committee, independence of nomination committee, shareholder-approved poison pill, dual class unequal voting rights of common shares, staged board, diversity of board and board duration. Finally, six firm-level financial data are included.
Project description:We construct two examples of shareholder networks in which shareholders are connected if they have shares in the same company. We do this for the shareholders in Turkish companies and we compare this against the network formed from the shareholdings in Dutch companies. We analyse the properties of these two networks in terms of the different types of shareholder. We create a suitable randomised version of these networks to enable us to find significant features in our networks. For that we find the roles played by different types of shareholder in these networks, and also show how these roles differ in the two countries we study.