Research Handbook on Shareholder Power
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Research Handbook on Shareholder Power

Edited by Jennifer G. Hill and Randall S. Thomas

Much of the history of corporate law has concerned itself not with shareholder power, but rather with its absence. Yet, as this Handbook shows, there have been major shifts in capital market structure that require a reassessment of the role and power of shareholders. This book provides a contemporary analysis of shareholder power and considers the regulatory consequences of changing ownership patterns around the world. Leading international scholars in corporate law, governance and financial economics address these central issues from a range of different perspectives including historical, contemporary, legal, economic, political and comparative.
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Chapter 18: Institutional investor activism in a context of concentrated ownership and high private benefits of control: the case of Italy

Massimo Belcredi and Luca Enriques


At first sight Italy looks like an unfavorable corporate environment for shareholder activism: concentrated ownership, inadequate legal protection for minority shareholders (Shleifer and Vishny 1997), and an apparent disregard for their interests by controlling shareholders (Macey 1998; Enriques 2002) are no welcoming signs for those interested in stirring for change to maximize the return on their investment. Yet, we find a non-negligible volume of ‘core’ active institutional investment (pressing on management, usually on governance issues and/or corporate strategy and specific transactions, possibly accompanied by ‘voice’ at shareholder meetings), together with some idiosyncratic forms of activism (e.g. the appointment of ‘minority’ directors on the boards of Italian listed companies). The research question we thus address is whether we see genuine value-oriented activism or just another strategy to engage in a privileged relationship with controlling shareholders to share in the private benefits of control. Anticipating our conclusion, we find insufficient evidence to support this ‘dark side’ (Rock 1994) view of activism. Quite on the contrary, we provide anecdotal evidence of activist initiatives aimed to curb the extraction of private benefits by dominant shareholders. For space reasons alone our focus is on activism by institutional investors (mutual, pension and hedge funds).

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