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American Law and Economics Review Advance Access published online on August 6, 2008
American Law and Economics Review, doi:10.1093/aler/ahn010
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© The Author 2008. Published by Oxford University Press on behalf of the American Law and Economics Association. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org

Management Always Wins the Close Ones

Yair Listokin

Yale Law School

Send correspondence to: Yair Listokin, Yale Law School, 127 Wall St. New Haven, CT 06511, USA; E-mail: yair.listokin{at}yale.edu.

JEL Classification: G34, K22, D72


  Abstract

While much has been made of "shareholder democracy" as a lever of corporate governance, there is little evidence about the efficacy of voting. This paper empirically examines votes on management-sponsored resolutions and finds widespread irregularities in the distribution of votes received by management. Management is overwhelmingly more likely to win votes by a small margin than lose by a small margin. The results indicate that, at some point in the voting process, management obtains highly accurate information about the likely voting outcome and, based on that information, acts to influence the vote. The precise point at which this occurs is unclear, though it is likely to be near the "poll-closing" time. Whatever the cause of management's advantage, it is clear that shareholder voting does not constitute a "representative" direct democracy.

I would like to thank Bruce Ackerman, Ian Ayres, Lucian Bebchuk, Stephen Deane, Alan Gerber, Allen Ferrell, Heather Gerken, Henry Hansmann, Daniel Ho, Stephanie Listokin, Jonathan Macey, Daniel Markovits, Edward Rock, Eric Roiter, Roberta Romano, Max Schanzenbach, Alan Schwartz, David Super and John Wilcox, and seminar participants at the Conference on Empirical Legal Studies, Florida State University Law School, Harvard Law School, Vanderbilt Law School, and Yale Law School for many helpful conversations and Shenyi Wu for able research assistance. I also thank the editor, John Donohue, and an anonymous referee for extremely useful comments and suggestions. All errors are my own.


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Y. Listokin
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