Voting Rationales: Silvina Rubio, University of Bristol Business School

Event Date: 19 March 2025

Speaker: Silvina Rubio, University of Bristol Business School

Venue: Strathclyde Business School, Cathedral Wing, CW406B

Time: 2pm

Abstract:

Why do institutional investors vote the way they vote? Using a novel dataset of institutional investors’ voting rationales - the justifications provided for their votes - we offer direct evidence on the motivations behind institutions’ votes in director elections. We use natural language processing techniques to classify and quantify the importance of each rationale, and first show that lack of independence and board diversity are top reasons for opposing directors. These rationales differing significantly from proxy advisors’ rationales, suggesting independent judgment. Second, concerns raised in rationales reflect
firms’ governance weaknesses: companies with low board gender diversity receive more rationales on diversity, with similar results for independence, tenure, busyness, and CEO duality. Third, companies listen and change their board composition in the directions stated in voting rationales. Our results suggest that voting rationales can serve as an effective, low-cost tool for institutional investors to communicate with portfolio companies, enabling companies to address investors’ concerns. These findings also suggest that institutional investors are not merely “rationale-washing”; rather, their rationales reflect the true motivations behind the votes.

Published: 18 March 2025