Shareholder Monitoring Through Voting : New Evidence from Proxy Contests

We present the first comprehensive study of mutual fund voting in proxy contests. Among contests where voting takes place, passive funds are ten percentage points less likely than active funds to vote for dissidents. The gap shrinks significantly when accounting for votes withheld from management nominees, settled contests, and votes by non-“Big Three” fund families. Passive and active funds are equally informed about firm fundamentals, although passive funds view contest-related SEC filings more often than active funds during contests, in absolute levels and incrementally relative to non-contest periods. We conclude that passive funds are engaged shareholders in high-stake voting events