Individual investors are active participants in the shareholder resolution process, filing approximately one quarter of the total number of shareholder resolutions voted on each year. Their activism, however, is controversial. Critics contend that the large number of resolutions filed each year waste corporate resources and shareholder attention. Defenders respond that every shareholder is a legitimate participant in corporate governance and that shareholder resolutions are an important means of exercising voting and economic rights to improve corporate outcomes. In this Closer Look, we examine the topic of individual shareholder activism in detail. We ask: Are individual activists harbingers of important new ideas or a strain on corporate resources? To what extent should shareholders actively participate in corporate policy? To what extent should they defer to the judgment of directors? How much “shareholder democracy” is the right amount? Should SEC rules governing shareholder resolutions be adjusted?
Copyright held by David F. Larcker and Brian Tayan. Further inquiries about reproduction and use should be directed to the Corporate Governance Research Initiative.
