Conference Agenda

While mutual funds are required to vote, shareholder voting is optional for institutional managers (IMs), a category that includes activists, hedge funds, private wealth, and mixed asset management. Only 44% of IMs vote on firms’ say-on-pay policies. However, their impact is large: the dollar value of their shares voted is twice that of mutual funds. Results suggest they use voting as a monitoring tool: among

larger positions, where the benefits of monitoring are greater, they are both

more likely to vote and more likely to vote against management. Yet, there is

substantial heterogeneity across IMs, with some using voting to pursue other

objectives, such as signaling friendliness toward management. We find that

smaller firms attract fewer IM votes overall, but among shares voted, there is

a more anti-management stance.

I examine a novel corporate governance channel exercised by small investors: shareholder class actions, in which dispersed shareholders collectively sue their own firms, often for failing to disclose material information. Paradoxically, these lawsuits typically generate wealth transfers from innocent current shareholders to the plaintiff class, while shareholders who profited from the nondisclosure by selling before the bad news are largely unaffected. In an efficient stock market, class actions serve as an off-equilibrium governance device that motivates initial shareholders to encourage full managerial disclosure. When markets are inefficient, both equilibrium disclosure and the impact of compensation awards are non-monotonic. Intermediate bad news are disclosed to influence the lawyer’s litigation strategy, while both small and large shocks are concealed; moreover, awarding higher compensation in class actions does not necessarily improve disclosure incentives for initial shareholders. Finally, a greater presence of small, short-term shareholders increases the likelihood of litigation, reversing the traditional view that dispersed ownership weakens shareholder discipline.

Environmental reputation risk has a market-wide component which is priced. We construct a market for environmental reputation from negative environmental incidents and estimate each firm's exposure (rho) to market-wide reputation index. Firms with higher rho earn higher average returns: the premium is about 0.90% per year and is stronger after the Paris Agreement. An equivalent measure based on NGO campaigns yields a smaller but positive premium. We then show that this exposure can be changed. Using proprietary shareholder-engagement data, we find that successful engagements with near-term, verifiable operational outcomes reduce firms' exposure to the reputation market and lower downside systematic risk by 11.3% of its standard deviation. Engagements focused on long-term targets or disclosure do not generate comparable effects. Reputation is therefore not only a firm-level asset; it is a priced market-wide risk.