7 Shareholder Democracy

2021 ◽  
pp. 152-166

Author(s):  
Nickolay Gantchev ◽  
Mariassunta Giannetti




Author(s):  
Nickolay Gantchev ◽  
Mariassunta Giannetti

Abstract We show that there is cross-sectional variation in the quality of shareholder proposals. On average, proposals submitted by the most active individual sponsors are less likely to receive majority support, but they occasionally pass if shareholders mistakenly support them and may even be implemented due to directors’ career concerns. While gadfly proposals destroy shareholder value if they pass, shareholder proposals on average are value enhancing in firms with more informed shareholders. We conclude that more informed voting could increase the benefits associated with shareholder proposals.



Author(s):  
Ernesto Marco Bagarotto ◽  
Cesare Schiavon ◽  
Cláudio Soerger Zaro ◽  
Elise Soerger Zaro ◽  
Marco Fasan


1983 ◽  
Vol 25 (3) ◽  
pp. 53-67 ◽  
Author(s):  
Donald E. Schwartz

While shareholders own the corporation, they cannot be said to run it. Champions of shareholder participatory rights cling to the idea that shareholder democracy limits the power of managers. Managers, for their part, uphold the democratic process as the basis of their power, dismissing claims that power has become unhinged from ownership. Public confidence that a democratic system functions in corporations—that managers, who exercise substantial power over our lives, are responsive to a governance process—may be misplaced, and this misplaced confidence becomes significant as the political activities and rights of a corporation grow. What, then, is the meaning of “shareholder democracy”?



2019 ◽  
pp. 107-123
Author(s):  
Sarah L. Quinn

This chapter looks at the postwar boom in mortgage bonds. The market heated up at the close of the 1920s as lenders marketed mortgage bonds to American families. With families now acting as investors in an unregulated financial market, these bond sales reflected the new logic of the shareholder democracy. The crux of the shareholder democracy was not just that Wall Street's markets could welcome small investors, but also that those markets should be unregulated. As the boom grew into a full-scale bubble, sellers had more reason to exploit the ignorance of small investors, and there was no real government oversight in place to stop them. Emboldened by the wartime bond drives and courted by Wall Street and advertisers, many Americans jumped into the shareholder democracy by investing in mortgage bonds. This was, in retrospect, a recipe for disaster. The collapse of this market in the early 1930s wiped out the private market for mortgage bonds completely and led to regulatory prohibitions against small-investor purchases of mortgage bonds.



2017 ◽  
pp. 46-64
Author(s):  
Josephine Woolley


2019 ◽  
pp. 90-126
Author(s):  
William Lazonick ◽  
Jang-Sup Shin

This chapter explains historical and systemic sources of institutional activism. Starting from re-examining underlying principles of New Deal financial regulations established in the 1930s that discouraged institutional activism, it argues that they were overturned in the 1980s and 1990s in the name of promoting “shareholder democracy.” It analyzes these misguided regulatory “reforms” including the introduction of compulsory voting by institutional investors, a proxy-voting rule change that greatly facilitated aggregation of proxy votes by predatory value extractors. The chapter argues that those reforms created a large vacuum in corporate voting because, contrary to the ideal of shareholder democracy and particularly with the increasing dominance of index funds, institutional investors had little ability and incentive to vote the shares in their portfolios. The main beneficiaries of these reforms have been the leading proxy advisory firms and a small group of hedge-fund activists intent on looting the business corporation.



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