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Abstract

Shareholder participation in corporate governance and investor activism are topics du jour in the United States and around the world. In the early part of the 20th century, Professors Berle and Means considered that shareholder participation was impossible in the transformed commercial world that they described in The Modern Corporation and Private Property. This was a world characterized by dispersed and vulnerable shareholders, in which owners do not manage, and managers do not own, the corporation. In such an environment, the goal of corporate law became one of protecting shareholder interests rather than providing shareholders with participation rights. The structure of capital markets and profile of shareholders in the United States today is dramatically different from that time. The rise of institutional investors challenged the idea that the only possible paradigm in corporate law is one of shareholder protection. Shareholder participation in corporate governance is not only feasible but a contemporary reality. As this Article demonstrates, however, there are competing narratives about shareholders and their right to participate in corporate governance around the world. Although a negative view underpins much recent debate in the United States, a diametrically opposite view of shareholder power and activism has gained traction in many jurisdictions outside the United States. This Article focuses on one manifestation of this positive view of shareholders, namely shareholder stewardship codes, which originated in the United Kingdom following the 2007–2008 global financial crisis and are now proliferating throughout the world. These competing narratives concerning the role of shareholders in corporate governance have significant regulatory implications. In particular, the narratives pose challenges to regulators, who attempt to differentiate between “good activists” and “bad activists.”

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