Ballot order effects in independent director elections

Abstract

Using a sample of individual mutual voting records, we examine ballot order effects in independent director elections. Our results show that down-ballot directors receive considerably less opposition from shareholders. This result holds in a sample where directors are positioned alphabetically on the proxy ballot, and, thus unrelated to the directors’ ability or position on the board. We find that the ballot order effect strengthens in settings where the ballot is more complex and shareholders are less attentive. These results suggest that investors, confronted with repeated decision making across multiple proxy votes, are subject to the choice fatigue bias that affects their voting patterns when electing directors. Furthermore, we find that the ballot order effect impacts director career concerns; although down-ballot directors are less likely to receive shareholder opposition, when they are opposed, they are more likely to leave the board. These findings, which document a systematic bias in the proxy voting process, are relevant to regulators and practitioners given the impact proxy voting has on firm governance.