Errors in Shareholder Voting

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 shareholder proposals. Our estimates inform policy debates on proxy access and proxy advisor regulation. Just over 5% of vote outcomes are mistakes, with the majority being false positives. In contrast, ISS recommendations are incorrect roughly half the time. Voting errors are costly – stock prices respond negatively to these mistakes. Despite institutions’ sophistication, institutional ownership is associated with more false positives. We directly estimate proposal quality and highlight where existing proxies result in similar inference