Toward a New Theory of the Shareholder Role: 'Sacred Space' in Corporate Takeovers

Abstract

Corporate law expresses a profound ambiguity toward the role of shareholders. Courts announce that shareholders are "critical to the theory that legitimates the exercise of power - by directors and officers over vast aggregations of property that they do not own." At the same time shareholders have a very difficult time actually making any corporate decisions. In this Article, we strive to define a new role for shareholders by drawing on economic theories of the firm and the structure of corporate law. More particularly we examine the role of shareholders in hostile corporate takeovers, the area where the interests of shareholders and directors collide most dramatically, and highlight a necessary "sacred space" for shareholder self-help, free of director or judicial intrusion.

JEL Classification: G34, K22