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In Search of the 'Absent' Shareholders: A New Solution to Retail Investors' Apathy

51 Pages Posted: 18 Nov 2016 Last revised: 29 Mar 2017

Yaron Nili

University of Wisconsin Law School

Kobi Kastiel

Harvard Law School

Date Written: November 16, 2016


Corporate law scholars have taken investors' rational apathy for granted for many years, considering it a necessary evil once ownership is no longer closely held. But how significant is retail investors' apathy and what is its impact? This Article is the first to provide comprehensive data on the true magnitude of retail investors' apathy and its negative impact on corporate governance. Building on behavioral economics tools, this Article then presents a novel solution that could substantially mitigate, if not fully eliminate, this long-standing problem of investors' rational apathy, with minimal regulatory burden. The solution is based on the premise that the high economic and mental costs associated with voting could be dramatically reduced by providing retail investors with a little "nudge" in the form of highly-visible voting default arrangements that would allow (or force) them to choose from a menu of voting shortcuts. Aside from strengthening shareholder democracy, mobilizing retail investors with different voting heuristics will have other important advantages such as providing for greater accountability of companies' incumbents.

Keywords: Rational Apathy, Shareholder Activism, Shareholder voting, Corporate Governance, Behavioral Law and Economics, Nudge

JEL Classification: K2, K22, G34, G38

Suggested Citation

Nili, Yaron and Kastiel, Kobi, In Search of the 'Absent' Shareholders: A New Solution to Retail Investors' Apathy (November 16, 2016). Delaware Journal of Corporate Law (DJCL), Vol. 41, No. 1, 2016; Univ. of Wisconsin Legal Studies Research Paper No. 1397. Available at SSRN:

Yaron Nili (Contact Author)

University of Wisconsin Law School ( email )

975 Bascom Mall
Madison, WI 53706
United States

Kobi Kastiel

Harvard Law School ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States
6174074442 (Phone)

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