The Proxy Voting Revolution: Will Shareholders Regain Control?

For decades, three giants—BlackRock, Vanguard, and State Street—have quietly cast millions of votes on behalf of everyday investors, influencing how U.S. corporations are run. That power, long taken for granted, is now being contested, potentially triggering one of the most significant shifts in corporate governance in decades.

In a new paper, The Proxy Voting Choice Revolution, Professor Alon Brav of Duke University’s Fuqua School of Business and his coauthors* provide the first data-driven look at how new ‘voting choice’ programs let investors—not fund managers—decide how their shares are voted.

“The idea of the large asset managers implementing these programs is simple,” Brav said. “If you own part of a company through a mutual fund, shouldn’t you have some say in how it’s governed?”

Big asset managers under pressure
The rise of proxy voting choice was driven by political and public skepticism about the power of the so-called “Big Three” asset managers—BlackRock, Vanguard, and State Street—which together hold roughly 20% of the U.S. equity market. Critics worried such concentration let a few firms effectively steer much of the economy.

The pressure intensified when fund managers began supporting environmental, social, and governance (ESG) proposals, drawing accusations of political bias.

Facing lawsuits and state-level pushback, the biggest asset managers launched ‘proxy voting choice’ programs in 2022 and 2023, allowing a growing share of their clients to vote their own shares. 

Inside Vanguard’s voting pilot
To study how these voting choice programs work, the researchers analyzed Vanguard’s 2023 pilot program. It involved five index funds, where investors could choose from preset voting ‘policies’—guidelines for how the asset manager will vote at companies’ annual meetings.

"For example, one policy is ‘board-aligned,’ meaning that the votes cast will follow the company management’s recommendations,” Brav said. “Another policy may prioritize ESG issues and might end up voting in opposition to the company’s management on related topics.”

By 2024, over 40,000 investors had opted into Vanguard’s pilot program—only about 1% to 4% of those eligible. Most, the researchers found, chose pro-management options.

The impact of voting choice
To test the impact of how voting choice might reshape corporate outcomes, the researchers projected Vanguard’s pilot results to fifteen close shareholder votes from 2024—asking, counterfactually, what would happen if all eligible investors had participated and voted like the pilot group?

The effect, they found, would be substantial. For example, at Tesla’s annual meeting two activist resolutions that had barely passed would instead have failed, under this counterfactual scenario.

 While many have predicted that voting choice would embolden investors to challenge corporate boards, the opposite might occur.

“If most investors select management-aligned policies,” Brav said, “proxy voting choice could end up strengthening the hand of corporate executives rather than diffusing their power."

A power shift to proxy advisors
So far, only a small fraction of eligible investors has opted into voting choice programs. Most still accept the default options provided by asset managers, or choose from a short menu of pre-packaged voting policies mostly designed by outside experts—proxy advisory firms that analyze corporate ballots and recommend how shares should be voted.

Yet these firms operate under limited oversight. Moreover, their incentives may not always align with investors’ best interests, especially when they charge flat fees, regardless of performance.

“Proxy advisors have become the new gatekeepers of corporate voting,” Brav said. “But without transparency or accountability, there’s a risk that we simply move power from one concentrated group to another.”

Perhaps reflecting these concerns, one of the main proxy advisory firms, Glass Lewis, recently announced it will move away from in-house vote recommendations and instead reflect individual investors’ preferences.

Reforming voting choice
The researchers suggested several reforms to make proxy voting choice more effective.

Regulators, they argue, could require clearer disclosure of how votes are cast, how proxy advisors are paid, and confirm that asset managers’ fiduciary duty extends to the third parties they hire.

They also propose linking proxy advisors’ fees to performance measures, rather than the current fixed fees. For example, tying pay to the dollar value of investor capital that has chosen the advisor’s policy option, could incentivize advisory firms to offer high-quality guidance.

For now, Brav believes proxy voting should keep asset manager guidelines as the default, balancing investor choice with professional oversight.

“We’re witnessing an experiment in shareholder democracy,” he said. “The question is whether it becomes a tool for empowerment or just an illusion of choice. The nice thing about markets is that all the different pieces of information are aggregated into a price. Will voting choice actually lead to more or less information reflected in a vote? That's an open question.”

*The paper is coauthored by Fuqua’s Alon Brav, Tao Li and Zikui Pan of University of Florida, and Dorothy Lund of Columbia University.