Classifying Institutional Investors

35 Pages Posted: 9 Aug 2004

Date Written: August 2004


Giving shareholders power to make major corporate decisions on their own initiative, as academics, regulators, and legislators have recently proposed, would reduce shareholder wealth. I accept in this paper that institutional investors will use shareholder intiative intelligently in service of their own interests. But institutional investors, motivated by market, political, and social forces, and insulation from these forces, are interested in things other than shareholder wealth. And the practical requirement that institutions with divergent sectional interests form voting majorities does not guarantee voting outcomes that advance a common shareholder-wealth interest rather than a package of sectional interests.

Effective shareholder voting (in the non-takeover context) must be justified as advancing a corporate-law end other than shareholder wealth maximization---for example, distributing corporate profits desirably, attaining a governance process valuable in itself, or inducing corporate compliance with external legal constraints. I conclude that shareholder initiative's supporters are unwittingly supporting the latest effort to redesign corporate law in stakeholders' favor.

Keywords: Corporate law, corporations, shareholders, voting, shareholder wealth maximization, stakeholders, institutional investors

JEL Classification: D21, D23, D63, D71, D72, D73, K22, L22, M14

Suggested Citation

Camara, Kiwi Alejandro Danao, Classifying Institutional Investors (August 2004). Available at SSRN: or

Kiwi Alejandro Danao Camara (Contact Author)

Camara & Sibley LLP ( email )

2800 Post Oak Blvd., Ste. 5220
Houston, TX 77056
United States
7139666789 (Phone)
7135831131 (Fax)


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