Hi Gordon,

Thanks very much for the post.

My happiness-based argument for shareholder empowerment is spelled out (apart from in the book) in a forthcoming article in the Ohio Northern Uni Law Review, titled "Shareholder Empowerment as an End in Itself: A New Perspective on Allocation of Power in the Modern Corporation".

I have included a link to it on my blog here:

http://www.james.observationdeck.org/?p=115

This will help in addressing some of the questions you have.

The book, and the article, focuses on individual retail investors rather than the institutional investors, mainly because in Australia (and I believe the UK) the institutions are already very active when it comes to corporate governance.

As I understand it, the position is different in the US, and the book does provide a little bit of discussion on why the happiness-based theory would equally apply to institutional shareholders, on the basis that the individuals behind the institutions would experience the same happiness experience from active participation as individual shareholders participating in companies they've directly invested in.

It is also briefly discussed that institutional shareholders have the resources and influence in companies to directly participate without any need for assistance.

So why do I throw those Proxy Statements in the trash without opening them?

Thanks for the link, James. I will take a look at the paper.

To make a similar point to the one Gordon makes in a slightly different way: I’m all for happiness. I’m just not sure from the little I’ve seen that the other side of the ledger is fully included: costs.

There are several very interesting questions mixed together here. First, there is happiness as the ultimate end of policy. There I think that McConvill is on strong ground. After all, economists care ultimately about welfare, so happiness as an end should make sense to anyone who buys into an economic framework. The happiness literature is essentially a quarrel with how welfare economics has handled the "welfare" concept. There are very tricky philosophical and empirical questions there, but my sense is that the happiness literature is onto something.

Second, there is the connnection between happiness and participation. There is an extensive empirical literature on this. Steve Bainbridge claims that the literature does not effectively establish a strong link. The topic is tricky and nuanced, and as usual social science empirical evidence is far from decisive, but my own sense is that Steve underplays the link between happiness and participation.

Finally, there is the question of shareholder happiness and participation as opposed to that of other constituencies, most obviously employees. It is here that I think Gordon is right to be skeptical, although I have not yet had a chance to read McConvill's work. At least for large public corporations, participation by employees seems much more crucial to advancing human happiness and well-being than shareholder participation. So, at any rate, I argue in my Employee Primacy working paper.

James,
I work for a corporate governance services provider in the United States and I have been reading through some of you opinion posts and recent publications. You are definitely on the right track and I would love to have a discussion some day about our twist on global governance practices... the introduction of decision science methodology in the boardroom. In other words a "refereed decision environment". Our program elevates governance practices and corporate transparency to the optimum level raising high above current best of breed practices. With each decision being scrubbed by third party experts in the field of decision science, two things occur. All decision events will be made in the best interest of the shareholders. The recruitment of talanted directors and officers will be much easier due to our Silver Bullet Guarantee, which states. We are the only corporate governance services provider that Guarantees that our client boards (inluding officers, directors, in-house counsel, SOX sinatories, as well as the fiduciaries of large pension funds) will NEVER lose a court adjudicated lawsuit alleging deficient fiduciary performance or WE PICK UP THE TAB. I look forward to reading your future posts and hopefully we can talk soon. chris.ensley@r3x.net