If You Give Shareholders Power, Do They Use It? An Empirical Analysis

Abstract:     
Many corporate governance observers believe that enhanced shareholder power is a promising cure for governance ills. This paper empirically examines the impact of differential amounts of shareholder power on governance arrangements. When states enacted statutory antitakeover protections in the 1980s, they allowed companies to opt-out of the provisions through various avenues. The states differed in the power granted to shareholders to opt-out of the antitakeover protections without agreement by the board of directors. Although this appears to be an important difference in shareholder power, the paper demonstrates that varying degrees of power are associated with little if any change in governance arrangements. At a minimum, the results suggest that simply altering shareholder power without changing other governance mechanisms is unlikely to lead to widespread changes in corporate governance.

Keywords: corporate governance, shareholder power, charter amendments

Working Paper Series