Errors in Shareholder Voting

Abstract

Voting errors occur when bad proposals pass (false positives) and good proposals fail (false negatives). We develop a structural empirical framework to study voting errors for share-holder proposals. Over one-quarter of vote outcomes are mistakes, with 6% (21%) as false positives (negatives). Prices respond negatively to false positives. Sophisticated owners are generally associated with fewer false positives and more false negatives, but high passive ownership is associated with worse overall outcomes and activists with better. Our evidence contributes to policy debates on proxy access and advisors and investor communication by showing voting errors are common and passing bad proposals is costly.