Introduction

Global institutional investors increasingly treat climate risk and board diversity as material financial risks. While traditional stewardship channels—private engagement, shareholder proposals, and divestment—are effective, they are resource-intensive and limited in scale. Voting rationale disclosures have emerged as a more scalable form of voice, transforming a binary ‘against’ vote into a public statement of dissent.

This study examines whether global investors use these disclosures to discipline Korean firms on environmental and social (E&S) issues and whether they drive subsequent corporate policy changes. Korea is a relevant setting, consistently ranking lowest globally in board gender diversity and heavily reliant on fossil fuels.

Literature review

Prior research shows that active engagement can influence corporate gender diversity and greenhouse gas emissions. Large investor campaigns have led to significant increases in female board representation, while evidence on climate-related shareholder proposals is mixed—environmental performance ratings improve but actual emissions remain largely unchanged. Voluntary nonfinancial disclosure is generally value-enhancing, though its benefit depends on credibility.

Hypotheses development

The study tests four hypotheses: (1) global investors express E&S concerns through voting rationale disclosures; (2) these disclosures enhance the informativeness of sustainability reports; (3) they induce changes in corporate E&S policies; and (4) their influence is more pronounced in smaller firms, owing to information saliency, limited private investor access, and resource constraints.

Data and methodology

The study uses a hand-collected dataset of 70,726 votes cast by 12 global institutional investors—nine pension funds and three asset managers—at Korean annual general meetings (AGMs) between 2020 and 2024. Director elections account for nearly half the sample (34,649 votes, or 48.99% (p.12)). Voting rationales are available for approximately one-third of observations (22,734, or 32.1% (p.12)), predominantly amongst ‘against’ votes.

Empirical results

Do investors express E&S concerns by voting rationale disclosures?

Investor opposition citing gender diversity increases significantly as the female director ratio decreases, with a one-standard-deviation decrease in the female director ratio increasing the likelihood of a diversity-related dissenting vote by about 1.53 percentage points—a relative increase of 76.5% in the opposition rate (p.17). In contrast, there is no statistical association between a firm’s total CO₂ emissions and climate-risk opposition, with only 4 to 15 firms facing such opposition per year (p.16).

Does voting rationale disclosure make sustainability reports more valuable?

Publishing a sustainability report is associated with a Tobin’s Q higher by 0.82—a 45.8% increase—but only for small firms where investors have not voted against management (p.19). This premium disappears when negative voting rationales are issued, suggesting rationales serve as a credibility check against potential greenwashing.

Does voting rationale disclosure prompt E&S-related changes?

Opposition citing gender diversity is associated with increases in female board representation (coefficient of 0.0517 (p.19)), but only for large firms during the pre-deadline period (2021–2022) of the 2020 Financial Investment Services and Capital Markets Act (FSCMA) amendment, which prohibited single-gender boards for firms with assets exceeding 2 trillion KRW. The effect disappears in the post-deadline period. For climate risk, no significant effect on emissions is observed in the full sample.

Does voting rationale disclosure have greater influence over smaller firms?

For climate risk, opposition votes are associated with a reduction in total CO₂ emissions of 0.258—approximately 19.9%—for smaller firms (p.22), supporting the “marginal information value” hypothesis. For gender diversity, regulatory compliance rather than investor pressure drove the observed changes in board composition.

Conclusion

Voting rationale disclosures alone are insufficient to drive substantive corporate policy changes. Improvements in gender diversity were primarily driven by the 2020 legal mandate rather than investor feedback, and large firms—which account for the majority of emissions—showed no significant emissions reduction following opposition votes. Only smaller firms responded meaningfully to climate-risk opposition. Voting rationales do, however, function as a market credibility signal on voluntary sustainability disclosures, distinguishing genuine E&S commitments from potential greenwashing.