Shareholder Activism and Corporate Governance in the United States
Bernard S. Black
Northwestern University - Pritzker School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)
As published in The New Palgrave Dictionary of Economics and the Law, vol. 3, pp. 459-465, 1998
I survey corporate governance activity by institutional investors in the United States, and the empirical evidence on whether this activity affects firm performance. A small number of American institutional investors, mostly public pension plans, spend a trivial amount of money on overt activism efforts. They don't conduct proxy fights, and don't try to elect their own candidates to the board of directors. Legal rules, agency costs within the institutions, information costs, collective action problems, and limited institutional competence are all plausible partial explanations for this relative lack of activity. The currently available evidence, taken as a whole, is consistent with the proposition that the institutions achieve the effects on firm performance that one might expect from this level of effort -- namely, not much.
Number of Pages in PDF File: 20
JEL Classification: G32, K22
Date posted: December 5, 1997