53 Pages Posted: 5 Apr 2010 Last revised: 20 Jan 2011
Date Written: April 4, 2010
In the vivid imagination of Delaware courts, the shareholder franchise is “the ideological underpinning” upon which corporate power rests. A corporate election to choose who should lead the firm is “corporate democracy” at work, since such elections give shareholders the power “to turn the board out.” However, in reality, the vast majority of corporate elections are ho-hum affairs. The current board members are re-elected without contest. Annual corporate meetings to hold the elections are dull - held in front of tame audiences in quiet auditoriums. Election outcomes are predictable. Rarely is there a contested corporate election, in which the incumbent directors face a challenge for their board seats. Even these affairs, while more interesting, are still as predictable. The incumbents always have the upper hand. The corporate election system is, as a consequence, broken, anti-competitive and in need of significant reform.
Yet, as will be shown in this Article, previous proposals have overlooked the “genius” of the public sector. In particular, in political elections campaign reformers have already offered a good answer for how to create competitive elections, even though the costs of campaigning to contestants is high, voters are apathetic and dispersed widely, and incumbents have a natural, built-in advantage: Make campaign subsidies available to challengers. Most notably, for instance, in federal elections the system of public subsidies for eligible presidential campaigns, the Presidential Campaign Fund, provides a remarkably sturdy roadmap for how to reform corporate elections and create a subsidy system for shareholder challenges to the board of directors.
Keywords: Proxy Contests, Corporate Elections, Proxy Solicitations, Retail Investors
JEL Classification: K20, K22
Suggested Citation: Suggested Citation
Harris, Lee, Shareholder Campaign Funds: A Campaign Subsidy Scheme for Corporate Elections (April 4, 2010). UCLA Law Review, Vol. 58, pp. 167-220, 2010; University of Memphis Legal Studies Research Paper No. 9. Available at SSRN: https://ssrn.com/abstract=1584213