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 20: The power of shareholders in the United States

Robert B. Thompson


Shareholders play a crucial, but decidedly subordinate, role in corporate governance. Despite recurring references to shareholder primacy and to shareholders as owners of the corporation, their power is not the plenary power of a primate or an owner but rather limited to doing only three things—voting, selling, and suing—and each in very limited doses (Thompson 1999). The shareholder role can best be understood by thinking of shareholders as one of the four principal actors in a shared governance system. Three are the only parties named in most corporations statutes—shareholders, directors, and officers—none of whom have primacy, with each sharing in a balance of power as to the decisions of the polity, not unlike a frequent description used for our political system. The fourth recurring player is the judiciary, determining the roles for each of the other three under the applicable statute or common law. Theory helps explain what each actor can do and the roles they have been assigned, and can underlie judicial decisions. But the purity of any theory is regularly subsumed within a dynamic in which the most dominant explanatory principle is that the four groups must share power as to the entity’s governance. Befitting an approach that eschews the purity of any one theory in favor of a messy interactive structural dynamic, section I begin by observing why the frequently identified touchstones of residual ownership and principal/agent are insufficient to adequately describe the shareholder role.

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