Visions and Revisions of the Shareholder

Abstract

Corporate theory, and the relative balance of power between directors and shareholders, is back on the agenda in relation to U.S. corporate law and law reform. While some scholars have argued for greater shareholder participation in a range of aspects of law, critics of this approach have suggested that such a reform agenda reflects an outmoded, if not illusory, shareholder-centered model of the corporation, and that the board's role is, in fact, to mediate between competing interests of different groups. This rise of comparativism in corporate governance has also presented a wider range of possibilities regarding the role of shareholders. And organizational comparativism, whereby investor-owned firms are viewed not in isolation, but as part of a broader matrix of associations, recognizes a smorgasbord of flexible governance structures, in which the role of participants may differ significantly. The article provides a backdrop to current debate on shareholder participation rights, by identifying and tracing a number of visions of the role of shareholder, which can be discerned at various times in corporate law and across various jurisdictions. These different visions of the shareholder, which reflect competing theories of the corporation itself, have important consequences for two major issues in contemporary corporate governance - first the appropriate level of shareholder participation in governance, and secondly the status of shareholder interests in the board's decision-making process. The article examines a range of different images of the shareholder, their theoretical underpinnings, and their doctrinal implications. Particular images of the shareholder examined in the article include:- the shareholder as owner/principal; as beneficiary; as bystander; as participant in a political entity; as investor; as corporate watchdog; and as managerial partner. The article discusses a number of contemporary legal developments against the backdrop of these evolving images of the shareholders, and argues that the adoption of any one-dimensional model of the past, such as "the shareholder as owner", is inadequate today and can result in a disjunction between law and reality.