Working Paper: NBER ID: w25717
Authors: Patrick Bolton; Tao Li; Enrichetta Ravina; Howard L. Rosenthal
Abstract: We estimate institutional investor preferences based on their proxy voting records in publicly listed Russell 3000 firms. We employ a spatial model of proxy voting, the W-NOMINATE method for scaling legislatures, and map institutional investors onto a left-right dimension based on their votes for fiscal year 2012. The far-left are socially responsible and the far-right are “money conscious” investors. Significant ideological differences reflect an absence of shareholder unanimity. The proxy adviser ISS, similar to a political leader, makes voting recommendations that place it in the center; to the left of most mutual funds. Public pension funds and other investors on the left support a more social and environment-friendly orientation of the firm and fewer executive compensation proposals. A second dimension reflects a more traditional governance view, with management disciplinarian investors, the proxy adviser Glass-Lewis among them, pitted against more management friendly ones.
Keywords: institutional investors; proxy voting; ideology; shareholder proposals
JEL Codes: G23; G30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Institutional investor voting (G23) | Significant ideological differences (P19) |
| Significant ideological differences (P19) | Underlying preferences over corporate policies (G38) |
| Ideological differences (P39) | Influence corporate policy decisions (G38) |
| Proxy advisers (ISS and Glass Lewis) (G34) | Shape ideological landscape of institutional voting (D72) |
| Voting behavior (D72) | Ideological positions of institutional investors (P16) |