Abstract

http://ssrn.com/abstract=952078
 
 

Citations (57)



 
 

Footnotes (118)



 


 



The Myth of the Shareholder Franchise


Lucian A. Bebchuk


Harvard Law School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)


Virginia Law Review, Vol. 93, No. 3, pp. 675-732, 2007
Harvard Law and Economics Discussion Paper No. 567, October 2005

Abstract:     
The power of shareholders to replace the board is a central element in the accepted theory of the modern public corporation with dispersed ownership. This power, however, is largely a myth. I document in this paper that the incidence of electoral challenges during the 1996-2005 decade was very low. After presenting this evidence, the paper analyzes why electoral challenges to directors are so rare, and then makes the case for arrangements that would provide shareholders with a viable power to remove directors. Under the proposed default arrangements, companies will have, at least every two years, elections with shareholder access to the corporate ballot, reimbursement of campaign expenses for candidates who receive a sufficiently significant number of votes (for example, one-third of the votes cast), and the opportunity to replace all the directors; companies will also have secret ballot and majority voting in all directors elections. Furthermore, opting out of default election arrangements through shareholder-approved bylaws should be facilitated, but boards should be constrained from adopting without shareholder approval bylaws that make director removal more difficult. Finally, I examine a wide range of possible objections to the proposed reform of corporate elections, and I conclude that they do not undermine the case for such a reform.

The paper, which is based on the Raben Lecture in Corporate Law at Yale and the Uri and Caroline Bauer Lecture at Cardozo, is scheduled to appear in May 2007 in the Virginia Law Review together with responses to it by Martin Lipton and William Savitt, Jonathan Macey, John Olson, Lynn Stout, and E. Norman Veasey.

Number of Pages in PDF File: 58

Keywords: Corporate governance, directors, boards, shareholders, shareholder rights, shareholder voting, shareholder franchise, corporate elections, corporate ballot, proxy fights, proxy contests, access to the ballot, staggered boards, confidential voting, majority voting, bylaws, entrenchment, myopia

JEL Classification: D70, G30, G32, G34, G38, K22

Accepted Paper Series





Download This Paper

Date posted: June 23, 2009  

Suggested Citation

Bebchuk, Lucian A., The Myth of the Shareholder Franchise. Virginia Law Review, Vol. 93, No. 3, pp. 675-732, 2007; Harvard Law and Economics Discussion Paper No. 567, October 2005. Available at SSRN: http://ssrn.com/abstract=952078

Contact Information

Lucian A. Bebchuk (Contact Author)
Harvard Law School ( email )
Cambridge, MA 02138
United States
617-495-3138 (Phone)
617-812-0554 (Fax)
HOME PAGE: http://www.law.harvard.edu/faculty/bebchuk/
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)
Feedback to SSRN


Paper statistics
Abstract Views: 18,639
Downloads: 4,714
Download Rank: 784
Citations:  57
Footnotes:  118

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.500 seconds