Empowering Shareholders in Directors' Elections: A Revolution in the Making
Pennsylvania State University, Penn State Law; Bocconi University - Department of Law
February 24, 2010
Penn State Legal Studies Research Paper No. 4-2010
Bocconi Legal Studies Research Paper No. 01-10
ECGI - Law Working Paper No. 147/2010
In the last few years, also in the light of the financial crisis in which the world has plummeted, the concern for self-referential and unaccountable boards has gained momentum and prompted several important reforms aimed at enhancing shareholders’ democracy. The reforms recently implemented or currently under consideration both at the state and federal levels, focusing on proxy access, might however prove to be too timid to exorcise this specter. This Article discusses the limits of the latest legislative and regulatory initiatives and advances a new, bold if not heterodox, proposal to empower shareholders and better align the composition of the board to the interests of all the owners of the corporation. The core of the proposal is a proportional voting system called "list voting." Building also on a brief comparative analysis, the Article advocates that "list voting" is superior to the traditional U.S. "cumulative voting" both from the point of view of directors, managers and controlling shareholders, and of minority shareholders.
Number of Pages in PDF File: 45
Keywords: Unaccontable Boards, Shareholders’ Democracy, Proxy Access, List Voting, Cumulative Voting
JEL Classification: G38
Date posted: February 24, 2010 ; Last revised: April 12, 2010
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