Research Handbooks in Corporate Law and Governance series
Edited by Jennifer G. Hill and Randall S. Thomas
Chapter 1: Shareholder power in America, 1800–2000: a short history
Writing the history of “shareholder power” immediately raises at least two questions: who are “shareholders,” and what kind of “power” could they wield? “Shareholder” should be easier; at least since the early nineteenth century, in the United States a “shareholder” has been understood as a person holding some residual claim to a corporation’s assets and some right to elect the corporation’s directors and vote on certain major transactions. Defining power is tougher; indeed, the concept is thorny enough that defining it in the abstract will be avoided here (Kahan & Rock 2010; Bebchuk 2005). For the purposes of this chapter, it suffices to define it as the ability of shareholders to influence or sway those controlling the corporation. Put the words together as “shareholder power” and new questions arise. As a historical matter, shareholder power doesn’t arise in a vacuum, so we must be discussing particular shareholders, at a specific moment, using some mechanism to accomplish a desired end. Who are these shareholders then—small shareholders or large blockholders? Are they acting individually or collectively? If they are exercising power through a mechanism, is the mechanism one created in corporate law, such as the classic rights to vote (for directors and certain transactions), sell (their shares to someone else), and sue (directors for breaches of fiduciary duty), or can power also come to shareholders through other means, such as a market for corporate control operating through the capital markets?