Busy Season and Proxy Recommendations

The short period of time, from the fourth week of April to the end of May, referred to as the proxy season has about 331 proposals voted a day relative to 27 proposals voted per day outside the proxy season. The compressed workload results in 17.6% fewer negative recommendations from ISS during this busy period. The proxy season also entails busy voting schedules for institutional investors who respond by increasing their reliance on ISS recommendations. Aggregate support for proposals with a negative recommendation from ISS is 10% lower during the busy period. Stock price reaction to vote outcomes in close elections show that successful negative recommendations during the busy period, that is when negative proposals fail, are associated with a reduction in firm value. In sum, ISS recommendations during busy voting periods are less likely to be negative, have greater influence on voting, and are associated with lower firm value. The results inform the policy debate on the role and influence of proxy advisors. Joint paper with Paul Calluzzo.

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