DP13633 Investor Ideology

Author(s): Patrick Bolton, Tao Li, Enrichetta Ravina, Howard Rosenthal
Publication Date: March 2019
Date Revised: March 2019
Keyword(s): institutional investors, Proxy voting, Socially responsible investment
JEL(s): G30, G32
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13633

We estimate institutional investor preferences based on their proxy voting records in publicly listed Russell 3000 firms. We employ a spatial model of proxy voting, the W-NOMINATE method for scaling legislatures, and map institutional investors onto a left-right dimension based on their votes for fiscal year 2012. The far-left are socially responsible and the far-right are "money conscious" investors. Significant ideological differences reflect an absence of shareholder unanimity. The proxy adviser ISS, similar to a political leader, makes voting recommendations that place it in the center; to the left of most mutual funds. Public pension funds and other investors on the left support a more social and environment-friendly orientation of the firm and fewer executive compensation proposals. A second dimension reflects a more traditional governance view, with management disciplinarian investors, the proxy adviser Glass-Lewis among them, pitted against more management friendly ones.