Shareholder Collaboration

65 Pages Posted: 7 Aug 2018 Last revised: 29 Jul 2020

See all articles by Jill E. Fisch

Jill E. Fisch

University of Pennsylvania Carey Law School

Simone M. Sepe

University of Arizona - James E. Rogers College of Law; University of Toulouse 1 - Université Toulouse 1 Capitole; Toulouse School of Economics; European Corporate Governance Institute (ECGI)

Date Written: April 1, 2020


Two models of the firm dominate corporate law. Under the management-power model, decision-making power rests primarily with corporate insiders (officers and directors). The competing shareholder-power model defends increased shareholder power to limit managerial authority. Both models view insiders and shareholders as engaged in a competitive struggle for corporate power in which corporate law functions to promote operational efficiency while limiting managerial agency costs.

As scholars and judges continue to debate the appropriate balance of power between shareholders and insiders, corporate practice has moved on. Increasingly, the insider–shareholder dynamic is collaborative, not competitive. This Article traces the development of insider–shareholder collaboration, explaining how collaboration, which originated in the venture capital context, has expanded into public companies. This expansion, the Article argues, is due to the increasing importance of partial information problems that, for many firms, have grown costlier than agency costs. Using insights from the economics of information, the Article shows how collaboration promotes the production and aggregation of information from insiders and shareholders, adding value that is lost under unilateral decision-making.

Modern corporate law and corporate governance are poorly prepared to handle insider–shareholder collaboration, however. The collaborative process places novel demands on traditional obligations of confidentiality and fiduciary duty as well as complicating the meaning of conflicts of interest. These concepts must be rethought to enable productive collaboration while limiting the potential that the collaborative process can be manipulated to permit collusive behavior or self-dealing.

Keywords: Corporations, corporate governance, venture capital, hedge fund activism, publicly-held companies, theory of the firm, private ordering, spectrum of shareholder collaboration, collaborative insider-shareholder model, enhancement of shareholder information, management, shareholders

JEL Classification: G34, K22

Suggested Citation

Fisch, Jill E. and Sepe, Simone M., Shareholder Collaboration (April 1, 2020). Texas Law Review, Vol. 98, p. 863, 2020, U of Penn, Inst for Law & Econ Research Paper No. 18-22, European Corporate Governance Institute (ECGI) - Law Working Paper No. 415/2018, Available at SSRN: or

Jill E. Fisch (Contact Author)

University of Pennsylvania Carey Law School ( email )

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215-573-2025 (Fax)

Simone M. Sepe

University of Arizona - James E. Rogers College of Law ( email )

P.O. Box 210176
Tucson, AZ 85721-0176
United States

University of Toulouse 1 - Université Toulouse 1 Capitole ( email )

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Toulouse School of Economics ( email )

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European Corporate Governance Institute (ECGI) ( email )

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