Who's Afraid of Shareholder Power? A Comparative Law Perspective

Jennifer G. Hill, Vanderbilt University Law School

Abstract

Who’s Afraid of Shareholder Power? A Comparative Law Perspective

Jennifer G. Hill*

Abstract

US corporate law is undergoing a seismic shift in relation to shareholder power. Although shareholders have traditionally had restricted participatory rights under US corporate law, this paradigm has been challenged in recent times. The shareholder empowerment debate raised shareholder power as a serious subject for corporate law reform. The global financial crisis has given the issue further impetus, and an unprecedented array of reforms and proposals to increase shareholder power are now on the table in the US. There has, however, been great resistance to adjusting the traditional balance of power between shareholders and the board of directors.

This article critically analyzes the US shareholder empowerment debate, and current reformatory zeal in this regard, through a comparative corporate governance lens. There is often an implicit assumption in corporate law scholarship that a unified and stable model of corporate governance exists across the common law world. The article challenges this widely held tenet. It shows that US shareholders have traditionally possessed significantly less power than their counterparts in other common law jurisdictions, and examines particular legal rules that contribute to this divergence.

The article also uses a comparative corporate governance analysis to discuss the possibility of commercial pushback. It examines a tension between legal rules, designed to enhance shareholder power, and commercial practices designed to subvert it. The existence of commercial pushback suggests that, even if US shareholder powers are significantly strengthened, that will by no means be the end of the story.