Amanda Weiner

Writing Assignment #8

Shareholders in a large publicly-held corporation do not seem to get much leverage over the decisions regarding the management and control of the corporation. The law seems to be very concerned that shareholders have available certain amounts of information for purposes of their investment decisions. However at the same time the law also seems hesitant to allow shareholders to truly influence corporate decision-ma!ing. The law appears to be e"tremely contradictory. To one e"tent the law ensures that shareholders have access to material information relating to their investments in the corporation. #onversely the law demonstrates hesitancy in giving shareholders true influence in the decision-ma!ing capacity. This hesitancy is e"emplified in the conte"t of pro"y fights $ specifically shareholder%s voting rights and shareholder%s proposals. Although some states re&uire that shareholders% have the right to vote this right is often relatively meaningless in effect. 'or e"ample shareholders cannot vote (against) a slated board* rather their opposition can only be demonstrated by an omitted vote. Similarly shareholders have the right to submit proposals to be included in pro"y statements. However many of these proposals may be e"cluded through seeming technicalities under S+A ,ule -.a8/c0. These two e"tents demonstrate an apparent contradiction in the law surrounding large publicly held corporations. This contradiction becomes clearer when considering that the decisions have at least some impact on the shareholder%s investment in the corporation. 1n short why does the law go so far as to protect shareholder%s initial investments but then fail to allow these same shareholders to ma!e decisions that affect these investments2 +"amining the nature of the large publicly held corporation sheds some light on this troubling contradiction. 'irst the corporation is a fictional entity so the law regards shareholders as the owners of the corporation. As a result the shareholders are the ob3ect of the elected management%s fiduciary duty and essentially the ultimate sources of the corporate power. 4irectors are elected with a strict duty to act on behalf of the corporation or in other words on behalf of the shareholders. Therefore the law regards the shareholders% investment which must be based on an informed decision as placing their confidence in the elected board to manage their investments /the corporation0 to the best of their ability. Similarly shareholders often hold stoc! in numerous corporations technically ma!ing them (owners) of numerous corporations. 5anagement or directors however have a duty to one corporation. 'urther these duties run beyond loyalty and care and e"tend to the way in which they may act in terms of investment decisions. 'or e"ample a director must abstain /or disclose if he chooses to do so0 from trading if he is the holder of inside /privileged0 information. Shareholders however are not limited in their trading abilities. 6astly publicly-held corporations are often large entities. 'or e"ample a corporation is automatically considered (public) when the company has assets of at least 7-8 million and 988 or more shareholders of common stoc!. Therefore corporations must elect a select group to ma!e business decisions because it is simply impractical for such a large number of people to effectively and efficiently ma!e business decisions on behalf of the corporation. These administrative impracticalities re&uire a centrali:ed component within a corporation. The law clearly appears to be contradictory. However when one e"amines both the fiduciary duties the management has to the corporation the shareholders and the administrative impracticalities it becomes at least somewhat clear as to why these contradictions e"ist in modern law governing large publicly held corporations.