Abstract
From an agency theory perspective (Fama, 1980; Fama & Jensen, 1983; see Lan & Heracleous, 2010, for a recent review), shareholder empowerment can be seen as a means of enhancing the balance of power between owners and managers, controlling managerial power, reducing the effects of information asymmetries, and keeping agency costs in check (Bebchuk, 2005). Critics of this view argue that changing regulatory arrangements (including shareholders’ voting rights and decision influence) would have unanticipated negative effects. Concerns include the introduction of inefficiencies in corporate governance and uncertainty as to how shareholders would be held accountable for their decision influence (Bainbridge, 2006; Bratton & Wachter, 2009; Sharfman, 2012). The equivocal outcomes of shareholder activism on both firm performance and shareholder returns (Goranova & Ryan, 2014) make an evaluation of the desirability of shareholder empowerment even more complex.
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