Shareholder Activism and the Law: The Future of US Corporate Governance

This book provides a complete framework for contemporary shareholder activism and its implications over US corporate governance, which is based on the director primacy theory.

Under director primacy theory, shareholders do not wish to be involved with the management, and when they do it equally means a transfer of power from the board of directors to shareholders, which in turn reduces the efficiency of the centralised decision-making in public-companies. However, this book demonstrates that shareholders do not use their power to transfer corporate control from the board to themselves, and even some form of shareholder activism is collaborative, which is a new paradigm for US corporate governance. This book shows that while monitoring remains as a key contribution of shareholders, they also bring new informational inputs to corporate decision-making, which could not be obtained under the traditional board model. Accordingly, contemporary shareholder activism enhances the board’s decision-making and monitoring capacity, without undermining the economic value of the board authority. Therefore, this book sets out that the complete approach of contemporary shareholder activism should be accommodated into US corporate governance. In doing so, this book considers not only legal and regulatory developments in the wake of the 2007-2008 financial crisis, but also the governance developments through by-law amendments. Furthermore, the author makes several recommendations to soften the current director primacy model: establishing a level playing for private ordering, adopting the proxy access default regime, the majority voting rule, the universal proxy rules, and enhancing the disclosure requirements of shareholders.

The book will be of interest to academics and students of corporate governance, both in the US and internationally.