Reshaping the Playing Field?

8 Pages Posted: 21 Feb 2009  

Stephen M. Bainbridge

University of California, Los Angeles (UCLA) - School of Law

Abstract

The rise of the institutional investor has been hailed as a corrective to the principal-agent problem for publicly held firms. It is argued that, because institutions typically own larger blocks than individuals and have an incentive to develop specialized expertise in making and monitoring investments, institutional investors can play a far more active role in corporate governance than dispersed shareholders. This article argues that institutional investors simply assume the role of agent, instead of the managers. Moreover, some institutional investors - e.g., labor groups, "ethical funds," government employee pension funds - may have interests other than simply increasing the firm's value. So the rise of institutional investors may not improve the position of dispersed shareholders.

Keywords: shareholder, Securities and Exchange Commission, proxy access, Delaware Code, corporate decisionmaking, American corporations, principle-agent, corporate law, shareholder activism, authority-based decisionmaking, board of directors, institutional investors, union funds, pension funds

JEL Classification: G3, G30, G23, G34, G38, G39, K2, K22, M1, M14, D92, D4, D21, D2

Suggested Citation

Bainbridge, Stephen M., Reshaping the Playing Field?. Regulation, Vol. 31, No. 4, Winter 2008-2009. Available at SSRN: https://ssrn.com/abstract=1345893

Stephen Mark Bainbridge (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States
310-206-1599 (Phone)
310-825-6023 (Fax)

HOME PAGE: http://www.professorbainbridge.com

Paper statistics

Downloads
155
Rank
155,841
Abstract Views
884