In his 2004 article, Lucian Bebchuk advances proposals designed to allow “shareholders to initiate and vote to adopt changes in the company’s basic corporate governance arrangements.” As Bebchuk explains, the housekeeping rules of corporation law effectively preclude shareholders from initiating corporate decisions. Indeed, the extent to which corporate law is stacked against shareholder “intervention power” goes beyond just the housekeeping rules; much of business law acts to limit shareholder involvement in corporate governance. Taken together, these rules form a regime I call “director primacy.”
Hence, I do not quibble with Bebchuk’s exposition of shareholder weakness; to the contrary, I welcome it as further evidence that my director primacy model accurately describes how corporations work. Instead, I intend to take issue with Bebchuk’s proposal to replace the existing, mostly permissive rules disempowering shareholders with a new set of mostly mandatory rules empowering them.
Part I of this Response argues that Bebchuk’s proposed default rules would be inefficient, asking: if shareholder empowerment is as value-enhancing as Bebchuk claims, why do we not already see it in the marketplace?
See full Article link.
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