NEW YORK, Sept. 20, 2006 (PRIMEZONE) -- Pomerantz Haudek Block Grossman & Gross LLP ("Pomerantz"), in its PomTalk blog, has weighed in on the recent debate about whether shareholders really own public corporations and whether that ownership entitles them to a meaningful role in board elections. A PomTalk post on September 19, 2006 critiques two recently released academic papers that analyze the relationship between shareholders and corporations and the merits and drawbacks of giving shareholders more of a voice in board elections.
In The Myth of the Shareholder Franchise, Professor Lucian Arye Beebchuk argues that the power of shareholders to replace the board is largely a "myth." Beebchuk's paper first analyzes why electoral challenges to directors are so rare, and then presents the case for reforms that would provide shareholders with a viable power to remove directors.
Professor Lynn A. Stout takes issue with Professor Beebchuk's analysis in The Mythical Benefits of Shareholder Control. Stout argues that while board control does worsen agency costs, it offers economic benefits to shareholders in the form of efficient and informed decision making; discouragement of inter-shareholder opportunism; and encouragement of valuable specific investment in corporate team production. Moreover, Stout claims that the metaphor that shareholders own corporations is misleading.
Visit www.PomTalk.com to read the latest posts on the subject and get links to the two academic studies. Also on PomTalk are posts concerning the Second Circuit's recent shareholder voting decision and the SEC's response, as well as timely commentary and news regarding corporate governance, executive compensation, pension reform, Sarbanes Oxley, and other issues essential to effective fund management.
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