Title: 'Empty Voting' and Shareholder Democracy: A Theoretical Perspective of the New Hunting Ground
Abstract: The shareholder vote is a matter at the core of the governance of the publicly held corporation. Corporate law deals with the agency problem between shareholders and managers by placing the power to monitor in the hands of shareholders. By making voting power proportional to economic ownership shareholders are given an economic incentive to exercise their voting power to maximize firm value. However, the underlying assumption of corporate voting that of a linked set of voting and economical ownership can no longer be relied upon. Innovations in finance, such as derivatives and the growth of share lending have made it easier to decouple voting rights from economic ownership. In this regard, the impact of activist shareholder on corporate governance has recently received considerable attention. In particular, recent scholars have shown that ‘’empty voting’’ - a situation in which an investor accumulates voting power in excess of his economic ownership - is used to influence corporate decision making to generate trading gains. Following the concerns scholars have expressed over empty voting, several regulators in Europe are considering a regulatory response in order to address empty voting.
Publication Year: 2009
Publication Date: 2009-01-01
Language: en
Type: article
Indexed In: ['crossref']
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