Modern-day shareholders influence corporate America more than ever before. From demanding greater accountability of executives to lobbying for a variety of social and environmental policies, shareholders today have the power to alter how American companies are run. Indeed, much attention has been directed towards the rise of large institutional investors and their influence on corporate governance and competition. But that attention has also largely left out of public and academic debate one of the most unique corporate governance actors: “corporate gadflies.” As we document in our recent study, forthcoming in the Southern California Law Review, much of the corporate governance agenda setting in the U.S. has been, and still is, dominated by a handful of individuals with limited resources, who own tiny slivers of most large companies, rather than by the “Titans of Wall Street.”

Our study is the first to address the giant shadow that corporate gadflies cast on the corporate governance landscape in the United States. How does an economy with corporate equity in the trillions of dollars cede so much governance power to corporate gadflies? More importantly, should it? In answering these questions, we make three contributions to the literature. First, using a comprehensive dataset of all shareholder proposals submitted to the S&P 1500 companies from 2005 to 2018, our study offers a detailed empirical account of both the growing power and influence that corporate gadflies wield over major corporate issues and of their power to set governance agendas. Second, we use the context of corporate gadflies to elucidate a key governance debate over the role of large institutional investors in corporate governance. Specifically, we underscore the potential concerns raised by the activity of corporate gadflies and question the current deference of institutional investors to these gadflies regarding the submission of shareholder proposals. Finally, the study proposes policy reforms aimed at reframing the current discourse on shareholder proposals and potentially sparks a new line of inquiry regarding the role of investors in corporate governance.

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