On Improving Shareholder Voting: An Essay for D Daniel Prentice
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Description
This article focuses on an area of corporate law that could do with a dose of cynicism: shareholder voting. One does not have to search hard to find proclamations regarding the essential role of shareholder voting in corporate law: how it legitimates the corporate form, and so forth. This view is particularly well expressed by Chancellor William Allen in his important opinion in Blasisus: “The shareholder franchise is the ideological underpinning upon which the legitimacy of directorial power rests. Generally, shareholder have only two protections against perceived inadequate business performance. They may sell their stock (which, if done in sufficient numbers, may so affect security prices as to create an incentive for altered managerial performance), or they may vote to replace incumbent board members. It has, for a long time, been conventional to dismiss the stockholder vote as a vestige or ritual of little practical importance. It may be that we are now witnessing the emergence of new institutional voices and arrangements that will make the stockholder vote a less predictable affair than it has been. Be that as it may, however, whether the vote is seen functionally as an unimportant formalism, or as an important tool of discipline, it is clear that it is critical to the theory that legitimates the exercise of power by some (directors and officers) over vast aggregations of property that they do not own. Thus, when viewed from a broad, institutional perspective, it can be seen that matters involving the integrity of the shareholder voting process involve consideration not present in any other context in which directors exercise delegated power.” In this article, we argue that shareholder voting, as a mechanism of accountability, is weak and getting weaker; as such, we should not put very much weight on it, whatever its rhetorical and legitimating role.
Source Publication
Rationality in Company Law: Essays in Honour of DD Prentice
Source Editors/Authors
John Armour, Jennifer Payne
Publication Date
2009
Recommended Citation
Kahan, Marcel and Rock, Edward B., "On Improving Shareholder Voting: An Essay for D Daniel Prentice" (2009). Faculty Chapters. 1905.
https://gretchen.law.nyu.edu/fac-chapt/1905
