Cisco shareholders recently voted down a shareholder proposal that asked Cisco's manage- ment to pay out its large cash reserves to shareholders in the form of dividends (Cisco currently has significant short-term assets, including cash and investment securities). The sponsor of the proposal argued that it is the shareholders' money and that it should be distributed to them. The vote was nearly 10 to 1 against the proposal.
a. Does the outcome of this vote imply that the voting process is controlled by managers and that shareholders do not have a voice in the company? Explain.
b. The proponent of the proposal also asserts that management's reluctance to pay dividends is related to the way they are compensated. Explain why this argument might be true.