This chapter considers the consequences of the low-to-non-existent marginal value of shareholders’ individual voting power in America’s widely held companies. It reviews the empirical literature on rational ignorance and rational irrationality in civic voting. It argues that we should expect similar levels of ignorance and irrationality in shareholder voting. The chapter then considers the evidence for this ignorance and irrationality in: (1) various measures of the value shareholder put on their voting rights; (2) what appears to drive voting outcomes in uncontested director elections; (3) the failure of shareholders to meaningfully hold directors accountable for failures and fraud; (4) the changes in the voting behavior of shareholders once majority voting is introduced; (5) shareholder responses to boards refusing to accept the resignation of a director who loses an election; (6) the evidence that contested director elections (proxy fights) have nothing to do with corporate governance; (7) the ways the economic decisions of shareholders are at variance with their voting behavior; and (8) the evidence shareholders do not pay attention to their own votes, and generally try to keep them purely symbolic.

Does agency cost theory work in the real world? The various hypotheses drawn from agency cost theory are considered in light of the relevant empirical evidence. Agency cost theory appears to be able to explain almost anything, but it predicts nothing.

This chapter analyses the ownership of Swiss corporations in the last decades. A main finding is that in listed companies, there has been a substantial decrease of the fraction of ownership by the top three shareholders. For example, for the listed companies ranked 21 to 100, the median stake of the three largest shareholders dropped from 42.5% in 2008 to 36.6% in 2018. More generally, the concentration of the disclosed shareholders has decreased. Non-domestic investors hold large stakes in companies listed in Switzerland and have become more important in the largest, most mature companies – not only have their share ownership significantly increased, but they are also more active in exercising their voting rights and in engaging with companies. We also provide some evidence, drawing on a series of surveys of market participants, that these developments, especially the presence and increasing activity of non-domestic investors, have direct implications on the governance practice of companies listed in Switzerland.

The chapter lays a roadmap for the Handbook on Shareholder Engagement and Voting. It defines shareholder engagement as shareholders’ involvement with their investee companies, using their shareholder rights and powers, both formal and informal (such as voting rights), to influence corporate affairs inside and outside general meetings of shareholders. The chapter further discusses the Handbook’s overall methodological considerations, that is, a sophisticated functionalist approach, with a combined use of doctrinal and empirical methods. The chapter proceeds to elaborate on the framework of research questions that guide the Handbook’s chapter contributions on 19 jurisdictions around the globe. The framework comprises three groups of questions: general jurisdictional features, legal means of shareholder voting and engagement, as well as shareholder voting and engagement in practice. The chapter concludes with a brief outline of the Handbook’s structure.

Empowerment of minority shareholders has been a central theme of China’s corporate governance movements in the past two decades. Cumulative voting and the majority of the minority rule are exemplary of Chinese reformers’ efforts to strengthen shareholders’ rights to vote. Other shareholders’ rights, such as the right to call a meeting, the right to propose, and the right to information, are also in place and, at least in theory, enable public shareholders to engage the controlling shareholders of their investee companies. The practical effect of these legal rights needs to be evaluated in the context of China’s path-dependent conditions, notably the prevalence of concentrated share ownership, the relatively weaker presence of institutional investors, and the approach to allocating corporate power which centres on the shareholders meeting.

This chapter has reviewed the rights of shareholders to participate in corporate affairs and engage with companies in Hong Kong. With concentrated ownership, it is unlikely that shareholders can change or influence corporate decisions through voting or engagement. Retail and minority shareholders rarely vote in general meetings. The promulgation in March 2016 of the Principles of Responsible Ownership in Hong Kong raised awareness of shareholder participation amongst large institutional shareholders. Legal means of protecting minority shareholders can help institutional shareholders to leverage their weak voting position when demanding changes in controlled firms. However, resorting to legal means is not affordable to retail investors. Hence, facilitating the online voting of retail shareholders and encouraging participation by institutional shareholders might be the best directions for future shareholder engagement in Hong Kong.

This chapter addresses the voting and other engagement practices in the 19 jurisdictions in this Handbook on Shareholder Engagement and Voting. First, it is shown that shareholder participation in AGMs differs significantly between countries, which is related to differences in ownership structures, ownership concentration, the powers of the general meeting of shareholders and the other means shareholders have for voicing their interests. Similarly, the powers of the general meeting of shareholders differ substantially between the different countries. Common shareholder voting items are relatively few but include some kind of vote on board nominees and some say over pay although in some countries compensation is an exclusive business of the board of directors. Shareholder proposals seem to be more common in common law countries where it is relatively easy to table a proposal. Questioning the board at general meetings is a widespread practice of especially small shareholders, contrary to many other shareholder engagement techniques commonly used by (institutional) investors. The wide diversity of engagement practices shows that an optimal and efficient division of powers between shareholders and board has not yet been found.

This chapter focuses on shareholder voting and engagement of Singapore-incorporated companies and companies that are listed on Singapore Exchange. It explains the relationship between directors and shareholders, the formal and informal means of shareholder engagement, and shareholder rights relating to voting, asking questions and receiving information. Quite apart from the ‘law in the books’, the practice of shareholder engagement is illustrated with contentious and challenging examples, including related-party transactions, the delisting of proposals amounting to the expropriation of minority shareholders, dual-class structures and ‘say on pay’.

The Chapter conceptualizes an analytical framework that can be adopted as a basis for future comparative research on shareholder voting and engagement. The conceptual framework consists of three layers: voting laws, engagement tools, and the eco-system for voting and engagement. The Chapter proceeds to discuss the future role of the shareholders meeting. It suggests that the global reality of the shareholders meeting cannot be readily and categorically reduced to either one of the dichotomic stereotypes: the shareholders meeting as a pro forma or as an emanation of shareholder democracy. Rather, there should therefore be a dynamic approach to the shareholders meeting. The Chapter also discusses the Handbook’s implications for the discourse on shareholder voice and activism, highlighting both the promises and limitations of shareholder activism around the globe. The Chapter concludes with discussions of some avenues for future research in the fast growing field of comparative shareholder voting and engagement.

Shareholder voting and engagement in the US have undergone substantial changes over the last 50 years. They have moved from being relatively sleepy issues to those that trigger insomnia in even the most hardened executives. The changes in the ownership structure of US publicly traded firms are probably the most important reason for the shift, but so too are rule changes that have facilitated greater shareholder activism. This chapter explores these developments while describing the rules of the road for shareholder voting in the US by focusing on Delaware jurisprudence and changes in US federal securities regulations. It also examines recent developments in shareholder activism and engagement, potential areas of voting and engagement going forward, and recent legal changes attempting to rein in activism to some extent. There are many moving parts in the shareholder voting apparatus in the US, and where things settle is likely to be a contests and perhaps uncertain matter.

This chapter provides an overview of the main findings of the 19 jurisdictions that are studied in the Handbook on Shareholder Engagement and Voting. The chapter describes the different legal means available for shareholders to engage with their companies, and outlines both the procedural requirements for general meetings and the material shareholder rights in a comparative perspective. Partly due to global capital markets and the rise of institutional ownership, this chapter shows important similarities in shareholder control rights and convergence between jurisdictions. An important example of such convergence are say-on-pay rights: in virtually all jurisdictions, shareholders have some sort of say-on-pay to date. Yet, this chapter also shows that important differences remain, also marked by the large variety of advisory and binding say-on-pay rights. Clearly, the although the legal infrastructure is a very important factor for the practice of shareholder rights, domestic factors often play a major role, even in today’s globalized markets.

Regulators and commentators around the world are increasingly demanding that institutional investors engage in stewardship with respect to their portfolio companies. Further, the demand for stewardship has broadened from an expectation that investors engage to reduce agency costs and promote economic value to a call for investors to demand that companies serve a broader range of societal interests and objectives. This chapter considers calls for stewardship in the context of the U.S. capital markets specifically as applied to index funds. It argues that, irrespective of the merits of institutional stewardship generally, the structure of index funds and the business environment in which they operate limit their ability to engage in effective stewardship. Although index fund sponsors have had a powerful influence on their portfolio companies, well-intentioned calls for them to play a more significant role and, in particular, claims that they should incorporate non-economic objectives more broadly into their engagement strategy, are in tension with the valuable role that index funds serve in the U.S. markets by providing a low-cost diversified investment option for an increasing segment of ordinary citizens. The chapter concludes by considering the possibility of using pass-through voting to enhance the stewardship potential of index funds.

This chapter studies the institutional investor’s voice in the Netherlands, focusing on shareholder voting in particular. The Dutch Stewardship Code, developed by institutional investor platform Eumedion, emphasizes the engagement and responsibilities of institutional investors in Dutch listed companies and should further boost engagement with investees. With a new dataset, the authors observe that institutional investors critically consider (non-)current voting items which could negatively affect shareholder rights, like some of the amendments of the articles of association as well as remuneration packages of directors that contain insufficient or inappropriate incentives. Compared to other investors, institutional investors show significantly higher opposition rates. Particularly, Eumedion members show even higher opposition rates than other institutional investors. However, there may still be room for a stronger focus on the activities and outcomes of stewardship, including changing the behaviour of companies, and not just policy statements.

Social media and other online platforms have had a profound impact on corporate activity because they allow ordinary shareholders to directly communiate with each other and publicly demand changes in corporate governance. This newfound “shareholder democracy,” powered by platforms like Twitter, changed the rules of the games for corporate managers and investors alike. Not only can the shareholder “crowd” respond to current events and impact stock prices directly, such as in the case of GameStop, but these platforms also allow disgruntled investors to organize protests and demand accountability and transparency. This Chapter explores various events in the modern era in which shareholders have wielded social media to impact corporate activity, either intentionally or by accident. Although it is unclear whether this consumer engagement produces a profitable effect on company value in the long run, it is clear that we are in a new age of corporate dealings. In light of these new technologies, the SEC has the opportunity to unlock, legalize, and even promote new, financial technologies.

This chapter examines two modalities of equitable intervention in corporate governance in cases of shareholder conflict. The first involves the extension of fiduciary duties to controlling shareholders, and the second judicial review on the grounds of oppression. Both forms of intervention are intended to be responsive to pathologies inherent in majoritarian governance in organizations featuring enfranchised members. Notwithstanding long-settled authority in Delaware and other American states for the proposition that controlling shareholders are fiduciaries of minority shareholders, I argue that fiduciary regulation is an inapt modality of equitable intervention given the nature of the problems generated by majority rule in corporations. By comparison, the oppression remedy—favored in commonwealth jurisdictions—enables more apt and effective tailored responses to these problems. The choice between these modalities of intervention implicates a choice between equity’s supplemental contributions to first-order law and its corrective, second-order intervention in first-order law. The chapter concludes with some general reflections on the place of equity in contemporary law.

This chapter critically examines the claim that shareholders have a homogeneous interest in wealth maximization. This claim, which is central to several arguments for the exclusive shareholder franchise, is not accurate. Shareholder preferences diverge along a number of dimensions, including those in or out of a control group; those with differential voting power; those involved in vote buying or voting trusts; hedged shareholders; management, employee, and pension fund shareholders; sovereign wealth funds; and corporate social responsibility investors. Even shareholders with shared goals of wealth maximization may have differing timelines, risk tolerances, and ways of defining “wealth.” Thus, actual shareholders have a range of preferences far too great to support many of the arguments that rely on their shared agreement.

This chapter provides an introduction to the basic structure and themes of the book. We begin with a description of the basic features of a corporation. We then discuss the intellectual foundations of corporate governance, including an overview of the doctrine of shareholder primacy and the view that a corporation is merely a nexus of contracts. We begin to catalog some of the cracks in these foundations, focusing on the shortcomings of the long-standing arguments for the exclusive shareholder franchise. Next, we make clear that our the criticisms of shareholder primacy and the exclusive shareholder franchise do not question, but indeed make extensive use of, the basic principles of standard economics and social choice theory. In other words, both our critique and our positive theory come from within the very tradition that gave rise to the original arguments for shareholder control. We conclude the chapter with a detailed plan for the rest of the book.

This chapter sets out the second of two positive arguments for extending corporate voting rights to employees. Democratic participation theory provides a unique argument for extending governance rights to both shareholders and employees. The theory is derived from the uncontroversial propositions that governance rights should be tied to interest and that we must be able to assess that interest in a way that is both accurate and manageable. These notions largely spring out of political theory, but are also consistent with economic and social choice theory and their focus on preference fulfillment and the construction of incentive structures designed to promote good decision-making. And, like the theory of the firm, democratic participation theory generally counsels in favor of adding employees to the corporate electorate, but also tells us when we might be in one of those rare situations where governance rights should be extended to other stakeholders. That is, both aspects of the shared governance model of the corporation – the theory of the firm and the theory of democratic participation – have a flexibility that the arguments for the exclusive shareholder franchise seem to lack.