When many decisions tire you out: Choice fatigue in proxy voting

Abstract

We examine ballot order effects in the proxy voting process. Our results show that investors and proxy advisors, confronted with repeated decision making across multiple proxy votes, are subject to choice fatigue that affects their voting patterns when electing (independent) corporate directors. Down-the-ballot directors receive considerably less shareholder opposition and are less likely to receive negative recommendations from the proxy advisor, Institutional Shareholder Services. The results show that the ballot order effect is strongest when the voter is less attentive and the ballot items are more complex. Our analysis focuses on a sample where directors are positioned alphabetically on the proxy ballot. This setting allows for a causal interpretation of our results as alphabetical positions are independent of the directors’ ability or position on the board. The results are also robust to firm-level and director-level controls, as well as fixed-effects that control for unobservable time-varying factors related to the firm and voter. Our findings contribute to recent discussion in the media and among regulators about the use of the proxy voting process as an effective mechanism of shareholder voice. If proxy votes and recommendations suffer systematic bias, then recent regulation aimed at transparency might not help to improve the mechanism.