Shareholders, Managers, and the Informational Efficiency of Voting Mechanisms
Abstract: This paper studies the informational efficiency of voting mechanisms in shareholder meetings. When the management does not affect the proposal being voted on, we show that voting mechanisms are more efficient when their ballot space is richer. Moreover, efficiency requires full divisibility of the votes. When the management has agenda power, we uncover a novel trade-off: more efficient mechanisms provide worse incentives to select good proposals. This negative effect can be large enough to wash out the higher voting efficiency of even the most efficient mechanisms.