• Shareholder Voice in Corporate Charter Amendments

    Author(s):
    Geeyoung Min
    Date:
    2018
    Group(s):
    MSU Law Faculty Repository
    Item Type:
    Article
    Permanent URL:
    https://doi.org/10.17613/5r5m-2m63
    Abstract:
    State corporate laws require shareholder approval for corporate charter amendments, but only the board of directors has the power to propose how to amend charters. The directors' exclusive power over charter amendment proposals creates a potential for managerial opportunism by refusing to propose amendments that empower shareholders or by pursuing amendments that favor managers. While shareholder approval can theoretically serve as a check against such opportunism, dispersed shareholders' rational apathy and collective action problems, can also prevent them from being effective monitors. Prior scholarship has thus viewed charter amendments with suspicion, but there has been no systematic, empirical examination to confirm or refute the possibilities of managerial opportunism. Based on hand-collected data on charter amendments of the top 250 U.S. companies over the past twenty-one years, this Article demonstrates that the recent trend of shareholder engagement has enabled them not only to check management-initiated amendments, but also to pressure directors into proposing shareholder-initiated amendments. Concerns over managerial opportunism, however, remain valid, as the data reveal subtle ways in which directors have preempted shareholders' voice with compromised terms. This Article updates our theoretical understanding of corporate charter amendments by reflecting the new dynamic with shareholder engagement, as well as normatively claims that state and federal authorities should secure even-handed procedures so as to give both shareholders and managers a meaningful voice in the charter amendment process.
    Metadata:
    Published as:
    Journal article    
    Status:
    Published
    Last Updated:
    4 weeks ago
    License:
    Attribution
    Share this:

    Downloads

    Item Name: pdf shareholder-voice.pdf
      Download View in browser
    Activity: Downloads: 0