The Fundamental Rights of the Shareholder
62 Pages Posted: 29 Jul 2005
Shareholders have many legal rights, but they are not all of equal significance. This article will argue that two rights the right to elect directors and the right to sell shares are more important than any others, that these rights should be considered "the fundamental rights of the shareholder," and that, as such, they deserve a great deal of respect and protection by law.
The history of corporate law has been one of increasing flexibility for directors and decreasing rights for shareholders. Although the law seems to have coalesced around the norm of shareholder primacy, this is not necessarily reflected in the specific legal rights of the shareholder. The role of the director in the corporation is clearly defined, but the role of the shareholder is not. This imbalance has led to the marginalization of the shareholder. A better understanding of the role of the shareholder is needed. This article seeks to advance that understanding by means of an in-depth analysis of shareholder rights. The goal of this article is to establish that the shareholder rights to elect directors and to sell shares are indeed fundamental. It will do so by demonstrating the importance of these rights from a wide variety of perspectives, including two types of doctrinal analysis as well as the three major competing theories of the corporation. Because these two rights are important indeed, the most important rights from almost any point of view, they ought to be respected as the fundamental rights of the shareholder.
Keywords: corporate governance, shareholder rights, shareholder primacy, voting, takeovers
JEL Classification: K22
Suggested Citation: Suggested Citation