If you Give Shareholders Power, do they Use it? An Empirical Analysis

Many commentators assert that enhanced shareholder power is a promising cure for corporate governance ills. This paper empirically examines the impact of differential amounts of shareholder power on governance arrangements. When U.S. states enacted statutory antitakeover protections in the 1980s, the states differed in the power granted to shareholders to opt out of the antitakeover protections without agreement by the board of directors. These differences in shareholder power are associated with little change in governance arrangements. The results suggest that simply altering shareholder power without changing other governance mechanisms is unlikely to lead to widespread changes in corporate governance.