Shareholder Initiative: A Social Choice and Game Theoretic Approach to Corporate Law
Jeffrey N. Gordon
Columbia Law School; European Corporate Governance Institute (ECGI)
University of Cincinnati Law Review, Vol. 60, p. 347, 1991
Columbia Law and Economics Working Paper No. 324
By longstanding practice, shareholders of large public corporations have delegated almost all decision rights over business matters to the board of directors. Given current calls for shareholder empowerment, it is worth revisiting the basis for the existing practice, as reflected in this 1991 paper. Among other things, we see that this absolute delegation rule minimizes potential pathologies in shareholder voting, including possibilities for opportunistic side-dealings and destructive voting cycles. These risks must be addressed lest shareholder empowerment merely replace one set of problems with another.
Number of Pages in PDF File: 42
Date posted: January 23, 2008