A New Approach to Shareholder Heterogeneity
Published in Shareholders’ Duties, Hanne S. Birkmose (ed.), Kluwer Law International, 2017
19 Pages Posted: 30 Nov 2016 Last revised: 20 Feb 2018
Date Written: November 24, 2016
Shareholders are not alike. It is hardly a misrepresentation to state that as fact, and legislation and legal literature contain numerous examples of both implicit and explicit expressions of this, yet acknowledging it is not the same as knowing how to handle shareholder heterogeneity from a legal and a corporate governance perspective.
The assumption of (institutional) shareholders as a homogeneous group of rational value-maximising shareholders was seriously challenged with the advent of the financial crisis, which further brought attention to the fact that neither companies nor shareholders always behave the way standard neoclassical economic theory predicts. But if we accept the standpoint of the European Commission that institutional shareholders hold a role as responsible, active owners of the investee companies with responsibilities and duties towards both the companies and society, this inevitably gives rise to a discussion of the applicability of the current shareholder concept. Is it capable of encompassing the issues of shareholder heterogeneity emerging in the wake of the recent financial crisis, or should a different approach to shareholder heterogeneity be applied?
The aim of the contribution is therefore to reflect on the current debate on the post-crisis shareholder and furthermore to set forth a suggestion for a diversified shareholder concept.
The contribution claims that it serves both a retrospective and a forward-looking purpose to divert attention away from who the shareholders are (institutional investor, individual person, sovereign wealth fund, etc.) and instead focus on how the shareholders invest (their investment modus).
The results of the contribution represent a suggestion for an analytical frame applicable in both hard and soft law legislation and is a piece in the puzzle towards a better understanding of shareholders and shareholder behaviour in the aftermath of the financial crisis.
Keywords: Shareholder heterogeneity
JEL Classification: K22
Suggested Citation: Suggested Citation