Stephen M. Bainbridge, Shareholder Activism in the Obama Era (UCLA Sch. of Law, Law & Econ. Research Paper Series No. 09-14, 2009).
Bainbridge, a long-time advocate for traditional director-centered corporate governance, explores the shareholder-empowerment proposals of President Obama and the Democratic Party, which have gained currency in the wake of the 2008 financial crisis. Bainbridge argues that these proposals are not only a threat to the “very foundation of corporate governance” but also potentially harmful to the U.S. economy.
Stephen M. Bainbridge, The Case for Limited Shareholder Voting
Rights, 53 Ucla L. Rev. 601-636 (2006).
Recent efforts to expand shareholder voting rights implicate two fundamental
corporate law questions: (1) why shareholders (and only shareholders) have
voting rights, and (2) why those rights are so limited. In answering these
questions, Professor Bainbridge explores the historical reasons for these rules
and argues that such limitations have been crucial to preserving corporate
structure and performance. In Bainbridge’s view, “[t]o the extent additional
change or reform is thought desirable at this point, surely it should be in the
nature of minor modifications to the newly adopted rules designed to enhance
their performance.” Read
Stephen M. Bainbridge, Director Primacy and Shareholder Disempowerment,
119 Harv. L. Rev. 1735-1758 (2006).
In response to Lucian Bebchuk’s proposals to reform corporate
governance in “The Case for Increasing Shareholder Power,” Bainbridge argues
that the absence of market examples of shareholder empowerment suggests they are
less useful than Bebchuk suggests. Arguing from first principles, Bainbridge
makes a case for preserving the present system of limited shareholder voting
rights and disputes Bebchuk’s suggestion that shareholders would use his
Stephen M. Bainbridge, Executive Compensation: Who Decides?, 83
Tex. L. Rev.1615-1661 (2005). In this review of Lucian Bebchuk and
Jesse Fried’s “Pay Without Performance: The Unfulfilled Promise of Executive
Compensation,” Stephen Bainbridge argues that Bebchuk and Fried overstate the
extent of corporate management’s control over the compensation process.
Furthermore, Bainbridge contends, the reforms they propose to corporate
governance to combat management’s supposed domination over the compensation
process, by promoting shareholder empowerment/activism in corporate governance,
are unconvincing. Read more...
Stephen M. Bainbridge, A Comment on the SEC Shareholder Access Proposal (UCLA
Sch. of Law, Law & Econ. Research Paper Series No. 03-22, 2003).
Professor Bainbridge analyzes a 2003 proposed rule that would have empowered
shareholders to nominate board directors on corporate proxy statements.
Bainbridge outlines the proposal, highlights critical issues, and argues that
the likely costs of its implementation would exceed its benefits.
Stephen M. Bainbridge, Director Primacy: The Means and Ends of
Corporate Governance, 97 Nw. U. L. Rev. 547-606 (2003).
Professor Bainbridge argues that director primacy—not shareholder
primacy—best solves the central problems of corporate law while operating to
maximize shareholder value. Read
Stephen M. Bainbridge, The Board of Directors as Nexus of Contracts,
88 Iowa L. Rev. 1-34 (2002).
Bainbridge rejects the two traditional corporate governance
models—managerialism and shareholder primacy—for director primacy, in which a
company’s board of directors are its true governing body. He also critiques the
“connected contracts” theory of Gulati, Klein, and Zolt.
Lucian A. Bebchuk & Scott Hirst, Private Ordering and the Proxy
Access Debate, 65 Bus. Law. 329-359 (2010).
Lucian Bebchuk and Scott Hirst analyze the SEC’s 2009 proposed proxy
access rule, which sought to provide shareholders with the ability to place
director election nominees on company proxy materials.
Lucian A. Bebchuk & Robert J. Jackson, Jr., Corporate Political
Speech: Who Decides?, 124 Harv. L. Rev. 83-117 (2010).
Lucian Bebchuk and Robert Jackson suggest that since public corporations are
allowed to engage in political spending, there needs to be a set of laws and
regulations to govern such spending, and they argue that current law
inappropriately applies the same rules to govern political spending decisions
made by corporate boards as those that govern ordinary business decisions. In
the authors’ view, the 2010 Citizens United v FEC decision has highlighted the
need for specialized rules for corporate political spending, and this article
aims to provide policymakers with a framework for such rules.
Lucian A. Bebchuk, The Myth of the Shareholder Franchise, 93
Va. L. Rev. 675-732 (2007).
Lucian Bebchuk claims that the “shareholder franchise”—and the notion
of shareholders replace underperforming company directors—are largely mythic.
Relying on data from 1996-2005, this article argues that challenges to remove
directors are uncommon and that successful removal of a director is extremely
rare. Bebchuk advances a set of reform proposals intended to empower
shareholders to replace company directors, which he contends will improve the
performance of corporations and benefit investors and the economy as a whole.
Lucian A. Bebchuk, Letting Shareholders Set the Rules, 119 Harv. L. Rev.
Bebchuk criticizes the longstanding U.S. corporate-law rule that gives
boards of directors control over the decision to change the company’s charter or
state of incorporation. Bebchuk argues for increased shareholder power to make
such decisions, which he contends would improve corporate governance
arrangements. Read more..
Lucian A. Bebchuk, The Case for Increasing Shareholder Power,
118 Harv. L. Rev. 833-914 (2005).
Lucian Bebchuk argues that shareholders’ powers to remove and replace
directors are insufficient to guarantee the adoption of any proposals that
shareholders may want to implement, but that management disfavors. This article
proposes an alternative corporate-governance regime intended to increase
shareholder power. Read more...
Lucian A. Bebchuk & Jesse M. Fried, Executive Compensation as an
Agency Problem, 17 J. Econ. Perspect. 71-92 (2003).
Lucian Babchuk and Jesse Fried suggest that executive compensation can
be best explained by looking at managerial power, rather than optimal
contracting. The authors propose steps to better align executive compensation
with shareholder interests and address what they consider to be an agency
problem. Read more...
Yonca Ertimur et al., Board of Directors' Responsiveness to
Shareholders: Evidence from Shareholder Proposals, 16 J. Corp. Fin. 53-72
This paper looks at directors’ increasing responsiveness to
non-binding, majority-vote proposals made by shareholders. By monitoring whether
directors follow up on shareholder proposals, this paper explores how corporate
managers view and react to the concerns of shareholders, and it asks whether
legislative reform is required to increase accountability.
Larry E. Ribstein, The First Amendment and Corporate Governance
(Illinois Pub. Law. Research Paper No. 10-24, 2011).
Citizens United v FEC may have ruled that corporate speech is fully
protected under the First Amendment, but regulation of the decision-making
processes that sanction such speech remains unclear. This article argues that
“protection of shareholders' expressive rights may be trumped by society's
interest in hearing corporate speech and the First Amendment's central goal of
preventing government censorship.”
Larry E. Ribstein, Accountability and Responsibility in Corporate
Governance, 81 Notre Dame L. Rev. 1431-1493 (2006).
Ribstein argues that debates over corporate social responsibility often
overlook available corporate-governance reforms that could promote corporate
profitability—making corporate managers more accountable to shareholders while
also addressing social goals. Ribstein provides a framework for better assessing
claims of corporate social responsibility in a shareholder context.
Roberta Romano, Less is More: Making Institutional Investor Activism
a Valuable Mechanism of Corporate Governance,
18 Yale J. on Reg. 174-251 (2001).
Roberta Romano analyzes existing literature on the role of
institutional investors and corporate governance to determine how best to
improve corporate governance. Arguing that institutional investor activism is
currently ineffective, Professor Romano makes recommendations for reform.
Vice Chancellor Leo E. Strine, Jr., Toward a True Corporate
Republic: A Traditionalist Response to Bebchuk’s Solution for Improving
Corporate America, 119 HARV. L. REV. 1759-1783 (2006).
Strine critiques Lucian Bebchuk’s “The Case for Increasing Shareholder Power”
and argues instead for a traditionalist approach to corporate law.