Sofie Cools is professor of corporate law at the Jan Ronse Institute for Company and Financial Law. This post is based on a chapter, forthcoming in the Research Handbook on Comparative Corporate Governance. Related research from the Program on Corporate Governance includes The Case for Shareholder Access to the Ballot by Lucian Bebchuk (discussed on the Forum here) and The Costs of Entrenched Boards by Lucian Bebchuk and Alma Cohen.
One of the most remarkable recent developments with regard to shareholder power is how American shareholders have forced boards of directors to amend even charter provisions to strengthen shareholder rights. In stark contrast, shareholder proposals have (so far) been relatively rare in Europe. Is the American abundance of successful shareholder proposals the epitome of strong shareholder power? In a paper that is forthcoming in the Research Handbook on Comparative Corporate Governance (Edward Elgar), I critically analyze the role of such shareholder proposals and their effects on shareholder power and warn of too much euphoria. A comparative analysis of shareholder proposal rights and substantive shareholder rights yields two important lessons.
First, shareholder power related proposals in American companies are essentially closing the gap in substantive shareholder power that existed between the United States and Europe. In the past fifteen years, shareholders have successfully made proposals in individual American corporations to de-stagger the board, to elect directors by majority instead of plurality vote, to allow shareholders to request special meetings and to allow shareholders to include director nominees on the company’s proxy. In doing so, they managed to break down or reduce some of the most important barriers for meaningful shareholder voice in director elections in Delaware companies—barriers that have been uncommon in Europe. At the same time, several European jurisdictions have gradually softened the rule of at will removal of directors, thus allowing directors a higher degree of protection against removal.
