Making sure your vote does not count: ESG activism and insincere proxy voting

This paper models strategic voting on ESG proposals by blockholders with heterogeneous reputational concerns and varying levels of commitment to ESG values. ESG activists, whose public-good gains from interven- tion are not attenuated by selling shareholders' free-riding, rationally sponsor even long-shot proposals. Propos- als that lower firm value but produce environmental benefits pass with positive, but perhaps small, probability. Our analysis leads to some non-obvious insights: neither increases in blockholders' personal commitments to ESG values nor increases in blockholder dispersion reliably increase the probability of proposal success. However, the probability of success is uniformly increased both by increasing overall reputational pressure on block- holders and by increasing the gap between the pressure faced by the most and least pressured blockholders.