De-Democratization of Firms: A Case Study of Publicly-Listed Private Equity Firms

77 Pages Posted: 18 Dec 2019

See all articles by Sung Eun (Summer) Kim

Sung Eun (Summer) Kim

University of California, Irvine School of Law

Date Written: December 17, 2019


This paper develops a definitional and conceptual framework to assess the extent to which firms are democratically organized and applies the framework to thirty-nine publicly-listed private equity firms (“PPE”). The proposed definitional framework merges the criteria used by influential observers of political democracies together with the metaphor of “corporate democracy” that has been used by state legislators, federal regulators, the judiciary, and legal scholarship that have shaped U.S. corporate governance. Under the proposed definitional framework, democratic corporate governance refers to a regime that invites broad participation by shareholders, treats shareholders equally, protects shareholders from misconduct, and facilitates mutually binding consultation. By the same token, de-democratization of firms refers to a trend towards a regime that is less inclusive, less equal, less protective, and unilateral.

This case study focuses on mechanisms that are chosen by PPEs to facilitate shareholders’ participation in governance and to hold managers accountable to shareholders. PPEs are an appropriate subject for this case study because they are firms that have adjusted their once highly private and sophisticated governance structures to accommodate public investors. The organizational and contractual features that are chosen by these firms reveal the balance between shareholder and managerial power within these newly public institutions. This review finds evidence of de-democratization across all four dimensions (inclusion, equality, protection, and mutuality) of the proposed definition of corporate democracy. This account of the de-democratization within one segment of firms yields new insights about the relationship between firms and government. This article takes the first step toward categorizing these various relationships between democratic principles in the corporate and political contexts and suggests tailored policy responses to the trend of de-democratization among firms.

Suggested Citation

Kim, Sung Eun, De-Democratization of Firms: A Case Study of Publicly-Listed Private Equity Firms (December 17, 2019). Harvard Business Law Review, 2020 Forthcoming, UC Irvine School of Law Research Paper No. 2020-01, Available at SSRN:

Sung Eun Kim (Contact Author)

University of California, Irvine School of Law ( email )

401 E. Peltason Dr.
Ste. 1000
Irvine, CA 92697-1000
United States

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