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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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(e) Liability as shadow director


Consequently, wording, purpose, and systematics suggest that § 117 (1) covers the impact exercised by active shareholders pursuing opportunistic goals and applying intensive pressure to administrative members, rendering their reference to § 76 (1) ineffective.1714

Furthermore, the corporation needs to suffer from damage based on the impact, which has to be kept strictly separate from damage resulting from entrepreneurial risk. The looting of a corporation would be relevant damage. Another example is a decreased stock price caused by the impact of active shareholders pursuing deviating interests based on empty voting or costlier participations in constituent or competing corporations. The same applies to a financially negative corporate disposition.1715 More generally, it comprises the results of the shareholder impact following a corporate strategy opposed to that of management, which has proven to be detrimental to the corporation.1716

Finally, the concerned impact has to be illegal and the offender needs to have acted intentionally. The illegality exists if the impacted member of the administration objectively breaches his duty. The intent requires the knowledge about the breach of duty and the general suitability of the action or omission to damage the corporation. Dolus eventualis suffices.1717 As a consequence, even active shareholders who coerce administrative members to act according to their deviating interests no matter what the consequences for the targeted corporation may be are liable under § 117 (1) if the targeted corporation suffers a damage.

The plaintiff, the corporation or the shareholders, need to demonstrate that the preconditions of § 117...

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