Some have argued that because of weaknesses in corporate democracy, there is widespread abuse of shareholders' rights in American securities markets, i describe a number of "horror stories" that shareholders might tell to support this claim. Then I argue that despite appearances to the contrary, there is not widespread abuse of shareholders' rights in American securities markets. This is because (i) corporations, when doing things that look abusive, are generally violating neither the legal rights nor the "charter" rights of shareholders and (ii) shareholders -in their role as shareholders -have no other rights than these.
In this paper, I will examine corporate democracy from the shareholder's point of view. My central question is this: Does corporate democracy as it commonly exists in America do an effective job of protecting the rights of shareholders?
There are, to be sure, other ways in which the effectiveness of corporate democracy could be analyzed. After all, shareholders aren't the only people whose rights can be violated by the activities of corporations. The employees of corporations also have rights, as do members of the public at large. In what follows, though, I will ignore these latter rights; my chief concern will instead be with the rights of shareholders.
Many investors are of the opinion that abuses of shareholder rights are not only possible under corporate democracy, but that they frequently take place.
Consider, for example, the case of Technical