January 31, 2011
Corporate Governance in an Age of Separation of Ownership from Ownership
Posted by Usha Rodrigues

I have a new article forthcoming in the Minnesota Law Review, part of its 2010 symposium on Government Ethics and Bailouts: The Past, Present, and Future.  Some readers will remember that I had a baby girl early in August; I was invited to the symposium, but didn't feel up to attending 2 months postpartem.  The organizers were nice enough to let me submit an article anyway, and that's one of the things I spent my summer doing.  Here's the abstract:

The shareholder empowerment provisions enacted as part of the recent bailout legislation are internally incoherent because they fail to address the short-termist realities of shareholder ownership today. Ownership has separated from ownership in modern corporate America: individual investors now largely hold stock through mutual funds, pension funds, and hedge funds. The incentives of these short-term financial intermediaries only imperfectly reflect the interests of their long-term holders - an imbalance only exacerbated by the bailout’s corporate governance legislation. The bailout’s focus on shareholder empowerment tactics - such as proxy access, say-on-pay, and increased disclosure - makes little sense if shareholders are only in it for the short term. This Article uses the bailout provisions to illustrate the point that shareholder empowerment inadequately addresses systemic problems. The Article explores the recent regulation of target-date retirement funds as a further example of regulators’ persistent neglect of the separation of ownership from ownership. The Article concludes with some reflections on the difficult question of how to encourage long-lived firms when individual players, including even long-horizoned investors, may be looking for a quick payoff.

Check it out!

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