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Shareholder Activism

Benefits and Drawbacks


Marion Hartmann

This book analyses and compares the benefits and drawbacks of shareholder activism in corporations under US American and German law, applying means of new institutional economics. The analysis concentrates on three fields of action of active shareholders in targeted corporations: nominations and elections, transaction decisions and financial decisions. The author evaluates and compares the effectiveness of the means which active shareholders use and of the limitations they face. She concludes that shareholder activism has benefits and drawbacks. Both require legal actions under the two jurisdictions, such as stronger nomination and election rights under US American law and more effective disclosure obligations under German law.
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C) Part I: Shareholder impact on nomination and election procedures


I) Introduction

The following Part will analyze the most influential formal means of shareholder impact on a corporation: the right to nominate and elect members of the board of directors under U.S.-American law and supervisory board members under German law. More specifically, it will focus on the opportunities for active shareholders to impact corporate nomination and election procedure to increase shareholder influence on nominations and elections and therefore make the administration more responsive to shareholder interests. This Part will concentrate on four issues in this context. First, this Part will examine the mandatory initiation right of shareholders to generally amend relevant rules-of-the-game for the nomination and election procedure. Next, it will analyze the admissibility (of the implementation) of the first nomination and election rule, the proxy access rule or nomination right. This rule grants shareholders the right to propose a nominee for a vacant director or supervisory board position via the corporate ballot. The second specific rule concerns the majority-voting rule, which makes the election of a director dependent on the support of a majority of the votes cast. Finally, this Part will analyze the cumulative-voting rule. It allows shareholders, in the case of several vacant director or supervisory board positions, to cast all of their votes for the different positions in favor of fewer or only one candidate.

1) Significance of nomination and election rights and procedures

The shareholder’s right to vote represents his most important formal means of participation in...

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