Shareholder Value: Company Law and Securities Markets Law - a British View

Abstract

This paper analyses the legal determinants of the rise of shareholder value as the goal of managerial endeavour in the UK. It starts from the puzzle that the rise of shareholder value has been unaccompanied by any changes in the relevant aspects of company law. It suggests that the solution to this puzzle lies in two areas, both linked to the reconcentration of shares in the hands of institutional shareholders. This has had two consequences. First, the unchanging rules of company law have had a different practical impact in the world of institutional shareholding. Second, institutional shareholders have promoted significant changes in securities markets law, especially in the areas of pre-emption rights and the regulation of take-over bids. It is suggested that the securities markets law reforms have been particularly important in supporting the current prominence of shareholder value. In analysing take-over regulation, the paper considers possible linkages between the degree of concentration of shareholdings and the nature of the takeover regulation which is likely to emerge. It suggests that this linkage is more complicated than some recent writing has allowed.

Keywords: shareholder value, institutional shareholders, directors, concentration of shareholdings, pre-emption rights, take-over regulation, tender offers, controlling blocks

JEL Classification: G3, K2