Doing the Right Thing? The Voting Power Effect and Institutional Shareholder Voting

Efrat Dressler, Yevgeny Mugerman

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


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.

Original languageEnglish
Pages (from-to)1089-1112
Number of pages24
JournalJournal of Business Ethics
Issue number4
Early online date15 Apr 2022
StatePublished - Apr 2023

Bibliographical note

Publisher Copyright:
© 2022, The Author(s), under exclusive licence to Springer Nature B.V.


  • Business ethics
  • Corporate governance
  • Shareholder voting
  • Voting power


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