Stewardship Theatre and Political Catering

We study how political pressure influences asset managers to adapt to the changing political landscape in the US Congress. We expect that larger institutions tend to engage in politically motivated “stewardship theatre†because they are more likely to face public scrutiny and regulatory attention from lawmakers. We find strong evidence that the proxy voting behavior of large asset management companies on environmental and social proposals aligns with the prevailing political preferences in the US Congress and changes accordingly as political dominance shifts. The inclination to cater to political power supersedes recommendations from proxy advisors and asset managers' own political beliefs.