Corporate Governance in an Age of Separation of Ownership from Ownership
University of Georgia Law School
January 7, 2011
Minnesota Law Review, Vol 95, pp. 1822-1866, 2011
UGA Legal Studies Research Paper No. 11-01
The shareholder empowerment provisions enacted as part of the recent bailout legislation are internally incoherent because they fail to address the short-termist realities of shareholder ownership today. Ownership has separated from ownership in modern corporate America: individual investors now largely hold stock through mutual funds, pension funds, and hedge funds. The incentives of these short-term financial intermediaries only imperfectly reflect the interests of their long-term holders - an imbalance only exacerbated by the bailout’s corporate governance legislation. The bailout’s focus on shareholder empowerment tactics - such as proxy access, say-on-pay, and increased disclosure - makes little sense if shareholders are only in it for the short term. This Article uses the bailout provisions to illustrate the point that shareholder empowerment inadequately addresses systemic problems. The Article explores the recent regulation of target-date retirement funds as a further example of regulators’ persistent neglect of the separation of ownership from ownership. The Article concludes with some reflections on the difficult question of how to encourage long-lived firms when individual players, including even long-horizoned investors, may be looking for a quick payoff.
Number of Pages in PDF File: 37
Keywords: Financial Crisis of 2008, Dodd-Frank Wall Street Reform and Consumer Protection Act, Bailout, Corporate Governance
JEL Classification: K20Accepted Paper Series
Date posted: January 26, 2011 ; Last revised: November 10, 2011
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