Mandatory Voting, Large Shareholder Power, and Wolf Packs

Our model develops a theory of how systematic voters (e.g., institutional shareholders) who always vote, in addition to partisans who vote strategically, affect the outcome of general meetings. Depending on the shareholder structure, we show that systematic voting has two opposite consequences for meeting outcomes: it reinforces the power of the largest group of systematic voters, and less expectedly, it also creates an incentive for partisans to vote to oppose together this largest group. We apply our results to different ownership structures. In particular, we emphasize the importance, for the board, of having the support of the largest partisan and the role of proxy advisors and examine the conditions under which blockholders can successfully oppose the largest group of systematic voters either alone or together (wolf pack).