On October 5, 2023, presenter Nadya Malenko discussed “CEO Markets: Public vs Private firms”. The lecture was moderated by Fabrizio Ferri.
Nadya’s slides from the lecture can be found here and the Q&A can be found below.
 Any idea how pass-through voting or automated voting platforms like iconikapp will impact proxy voting?
These developments are quite likely to change voting outcomes. According to BlackRock, which opened the possibility of pass-through voting to its institutional clients in 2021, clients with about $450 billion of assets under management have already chosen to retain their voting rights. The clients of other large asset managers are doing the same, so the impact can be substantial. We explore the tradeoffs of pass-through voting in our new paper “Voting Choice.” On the one hand, pass-through voting and voting platforms allow shareholders to express their preferences, something that was not available to investors before. On the other hand, this might have negative effects on the information content of the votes, especially given the collective action problem among shareholders.
 Votes in favor of shareholder proposals went down this year, probably because of anti-ESG criticism. Is that trend likely to continue?
Another potential reason for the decline in voting support for shareholder proposals this year is the change in the content of proposals that appear on voting ballots. This year, there was a substantial increase in proposals on E&S issues, partly due to the recent change (towards being more lenient) in the SEC’s regulation of such proposals. Accordingly, there is a perception that many E&S proposals that were submitted this year were too prescriptive and restrictive on companies, resulting in low support rates. It is possible that the sponsors of such proposals, realizing that they are not getting much traction, may decrease the submission of such proposals in the future, which could increase the support rates. So overall, the direction of the trend is hard to predict.
 Years ago proxy access passed but it has only been used once in an obscure case because corporations filed bylaw amendments limiting proposing groups to 20 members. Now we have universal proxy rules, which are also targeted with bylaw amendments, such as requiring that nominated candidates be interviewed by current boards. Will such bylaws kill the benefits of universal proxy rules?
Indeed, actions taken by companies have the potential to decrease the effectiveness of universal proxy rules. In addition to bylaw amendments, companies are increasingly filing lawsuits over the validity of activist nominations. They are also increasingly rejecting activists’ nominations, which in turn leads activists to bring litigation as well. All of this increases the costs and hurdles to make universal proxies effective. So far, according to recent research, there has not been any substantial change in the number of proxy contests, in the size of firms being targeted, or in campaign success. An excellent webinar discussing some of these issues and facts is available here.
 Do funds that announce their votes in advance (such as Calvert, CalSTRS, Norges) have any impact on the voting of other shareholders.
In general, very few funds announce their votes in advance: institutional investors are often reluctant to make such announcements, and they sometimes change their votes closer to the actual date of the meeting if new information comes in. There is no evidence so far regarding whether such announcements have an impact.
 Any speculation as to how the recently developed market for buying and selling votes will impact votes?
The theoretical literature concludes that allowing vote trading has both benefits and costs. On the one hand, vote trading is a way to decouple cash flow and voting rights, which may exacerbate conflicts of interest between shareholders and decrease efficiency. On the other hand, vote trading can enable shareholder activism, as well as increase the informativeness of voting outcomes, which can improve efficiency. There is so far not much empirical evidence about the recently developed market for votes, but there is earlier empirical literature that analyzes the share lending market as a way to trade votes (e.g., Christoffersen et al., 2007).
 Did your research find any instance of a fund being sued or penalized for voting against their fiduciary responsibility re proxy voting?
One instance I am aware of is the following: On September 20, 2022, the SEC announced settled charges against Toews Corporation for voting on behalf of its clients “without taking any steps to determine whether the votes were in the clients’ best interests” and “for failing to implement policies and procedures reasonably designed to ensure it voted client securities in the best interests of its clients.” The SEC enforcement release is available here. However, this is not common.
 In the literature, some studies consider voting against ISS to be a signal of active monitoring by shareholders, while some use voting against management. These two metrics are actually contradictory in the case of contentious votes. How should we interpret this?
Both of these measures have their limitations. For example, votes against management are subject to the selection critique: proposals that receive strong support from the firm’s major shareholders are relatively less likely to come to a vote. This is because major shareholders often discuss their views with management in advance, which may lead management to settle or make other preemptive changes to the proposal that is going to be supported by the firm’s large investors. As a result, we are more likely to see that on proposals that come to a vote, major investors vote with management, but this does not indicate the lack of active monitoring. Voting against ISS is also not always a perfect signal of active monitoring because it uses ISS recommendations as the “correct benchmark”. As we point out in our paper, proxy advisors’ recommendations themselves might be biased against management (suggesting that they are not always the “correct benchmark”), in which case a vote in favor of management but against ISS could be consistent with unbiased and active voting. Overall, more research is needed to construct measures of active monitoring via voting. We discuss these and related issues in Section “The Propensity to Vote Against Management” on pages 24-25 of our review paper on index funds.
 It seems to me the largest influence of proxy advisors is in proxy contests. Confirmed?
The causal effect of proxy advisors on voting outcomes is hard to tease out for two reasons: 1) shareholders and proxy advisors make their decisions based on the same underlying factors, which can give rise to a strong positive correlation between recommendations and voting support even if the influence of recommendations per se is not that strong; 2) proxy advisors develop their recommendations based on feedback from their institutional clients, so votes and recommendations are tightly related. A few papers have tried to estimate the causal impact of ISS recommendations and overcome these complications. In our paper on say-on-pay voting, we estimate the causal impact of ISS and conclude that a negative ISS recommendation leads to a 25 percentage point reduction in say-on-pay voting support. Based on correlations alone, the answer to the question about proxy contests is ambiguous: Brav et al. (2023) find that funds that typically vote with ISS on non-contentious proposals tend to decrease the sensitivity of their votes to ISS in proxy contests, whereas funds that typically vote with management on non-contentious proposals tend to vote more with ISS on proxy contests.
 Have you seen ES (from ESG) shareholder contests? I don’t see the Engine 1 contest that way, since they ran candidates with industry experience.
I agree that the contest by Engine No. 1 was to a large extent driven by financial considerations, and many shareholders voted based on those considerations as well. At the same time, since this proxy contest was ultimately about climate-related issues, it may well be that at least some shareholders’ votes were influenced by their preferences and views regarding climate change.
Professor Nadya Malenko is a Professor of Finance at Boston College’s Carroll School of Management. She is also a faculty research associate at the National Bureau of Economic Research, a research member of the European Corporate Governance Institute, and a research fellow of the Centre for Economic Policy Research. Her research examines shareholder voting, the design of corporate boards, shareholder activism, and the allocation of authority in organizations. She is an Associate Editor at the Journal of Finance, Journal of Financial Economics, and Journal of Financial and Quantitative Analysis, and serves on the board of directors of the American Finance Association, Western Finance Association, European Finance Association, and Financial Management Association.
For further information on the webinar please contact Professor Jun Yang, Director of the Institute for Corporate Governance at firstname.lastname@example.org.