Shareholder Democracy and Corporate Governance

24 Pages Posted: 7 Dec 2008 Last revised: 13 Feb 2018

Abstract

High levels of executive pay, accounting irregularities, and historic financial market turmoil are fueling calls for a stronger shareholder-voice in corporate governance. While this strengthening can reduce important agency costs, however, it can also go too far, destabilizing business strategies and weakening contracts with other stakeholders. This article reviews evidence from the corporate finance literature that these risks are more than hypothetical, as well as the social choice literature implying that corporate governance likely benefits from a concentration of authority in management. While political pressure is building for increased shareholder-accountability, mandating that increase may weaken an already strong legal foundation for stable and productive business associations.

Suggested Citation

Falaschetti, Dino, Shareholder Democracy and Corporate Governance. Review of Banking and Financial Law, Forthcoming, FSU College of Law, Public Law Research Paper No. 333, FSU College of Law, Law, Business & Economics Paper No. 08-14, Available at SSRN: https://ssrn.com/abstract=1312447

Dino Falaschetti (Contact Author)

US Treasury ( email )

Office of Financial Research
Washington, DC District of Columbia 20220
United States

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