Some Skepticism About Increasing Shareholder Power

46 Pages Posted: 15 Aug 2005

See all articles by Iman Anabtawi

Iman Anabtawi

University of California, Los Angeles (UCLA) - School of Law

Date Written: August 2005


This Article examines shareholder primacists' claims that making boards more accountable to shareholders would go a long way toward solving the agency problem between shareholders and managers and enhancing shareholder welfare. I argue that in the shareholder power debate over whether to vest corporate decisionmaking authority primarily in a firm's shareholders or in its board of directors, shareholder primacists underplay deep rifts among the interests of large-block shareholders - those shareholders most likely to make use of increased shareholder power. The argument for reapportioning decisionmaking authority within the firm away from boards toward shareholders assumes that shareholders are a monolith with the single, overriding objective of maximizing share value. Some of the most significant modern shareholders, however, have private interests that conflict with (1) the goal of maximizing shareholder value generally or (2) the interests of other shareholders who would choose to maximize shareholder value differently, given their peculiar characteristics. Such private interests may induce influential shareholders to engage in rent-seeking behavior at the expense of overall shareholder welfare. In light of this possibility, which I argue is substantial, we would do well to pause before implementing corporate governance measures designed to further empower shareholders.

Keywords: corporate governance, corporation law, shareholders, voting rights

JEL Classification: K22

Suggested Citation

Anabtawi, Iman, Some Skepticism About Increasing Shareholder Power (August 2005). UCLA School of Law, Law-Econ Research Paper No. 05-16, Available at SSRN: or

Iman Anabtawi (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States

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