December 2025

When Fewer Shareholders Vote, Each Vote Matters More

Shareholder voting is meant to be the cornerstone of modern corporate governance. It is the mechanism through which investors approve directors, scrutinise pay, and respond to major strategic decisions. In principle, unless there is a dual-class structure, each share carries one vote, and control should reflect formal ownership. In practice, however, many shareholders do not vote. 

Average turnout at US shareholder meetings is around 80%, but this masks substantial variation across firms and over time. In some firms, fewer than 60% of shares participate; in others, more than 90%. Because most US votes are decided on a votes‑cast basis, this variation means that effective influence – what we call de‑facto voting power – can diverge sharply from formal, de‑jure ownership. For instance, a shareholder with a 15% stake exercises 25% of the votes if only 60% of shares are voted. In that environment, each vote is more pivotal. This observation raises a natural question: Do markets value voting rights more when fewer shareholders show up to vote?

In a new paper, “De-Facto Voting Power and the Value of Voting Rights,” CERF Fellow Oğuzhan Karakaş and research collaborators Vikas Agarwal (Georgia State University), Peter Limbach (University of Bielefeld), and Honglin Ren (Renmin University of China) find that the answer is yes. The authors show that when turnout is low and persistently so, investors are willing to pay a higher premium for voting rights, reflecting the greater de‑facto power attached to each vote.

To quantify how much investors are willing to pay for voting rights, the authors use an option‑based measure of the voting premium developed in earlier work by Kalay, Karakaş and Pant (JF-2014). Options on a firm’s shares capture the cash flow value of the stock, but not its control rights. By combining options, the authors construct a synthetic non‑voting share and compare its price with the actual voting share. The percentage difference is the voting premium. Using data for US firms from 2003 to 2022, they find that this premium is strongly and negatively related to past voter turnout: a one‑standard‑deviation decrease in turnout, about 13 percentage points, increases the option‑implied voting premium by roughly 80% of its mean. Since turnout is highly persistent at the firm level, investors can anticipate future participation and price de‑facto rather than merely de‑jure voting power.

To move beyond correlation, the paper exploits the 2010 amendment to NYSE Rule 452, which eliminated broker discretionary voting in uncontested director elections. This reform mechanically reduced turnout by preventing brokers from voting uninstructed shares on investors’ behalf. Firms that had previously relied more heavily on broker votes experienced substantially larger drops in turnout after 2010, especially in director elections. Consistent with the de‑facto power hypothesis, these firms saw their voting premia increase to a level around twice the sample’s average daily voting premium, relative to less affected firms. This difference‑in‑differences result, robust to matching and a broad set of controls, provides plausibly causal evidence that lower shareholder participation increases the market value of voting rights by making each vote more pivotal.

The authors further show that low turnout is not just a pricing variable but also a governance signal. Firms with lower participation today are more likely to face contentious shareholder meetings, stronger dissent in voting, and activist campaigns in the future. The negative relation between turnout and the voting premium is particularly strong among firms with a high predicted likelihood of such disputes, suggesting that investors value voting rights most when control is likely to be contested. The sensitivity of the voting premium to turnout is also shaped by institutional features: it is stronger under majority voting than under plurality voting for directors, and it largely disappears when firms use cumulative voting, which allows minority shareholders to concentrate votes and reduces the dependence of control on aggregate turnout.

Taken together, these findings imply that the economic value of corporate control depends not only on ownership and formal governance provisions, but also on persistent patterns of shareholder engagement. Markets price votes according to the power they are expected to confer in practice. Regulations and institutional practices that affect who actually votes – such as broker voting rules, voting standards, or emerging pass‑through voting programmes – can therefore alter both the distribution and the valuation of control. Understanding how these participation dynamics evolve, particularly in jurisdictions with lower average turnout and similar votes‑cast rules, is likely to be increasingly important for investors and policymakers concerned with shareholder democracy and corporate accountability.

The central message of the study is straightforward: Markets price the power that votes actually confer, not just the rights they formally represent. Because turnout is both low in many firms and highly persistent, investors can anticipate when their votes will be more pivotal and adjust how much they are willing to pay for voting rights. As new initiatives, such as pass‑through voting for index investors or digital platforms for retail voting, continue to spread, understanding how they will affect both turnout dynamics and the pricing of voting rights is an important agenda for researchers, practitioners, and regulators alike.