Shareholder proposals shaking up shareholder say: a critical comparison of the United States and Europe

Abstract

One of the most remarkable recent developments with regard to shareholder power is how American shareholders have used shareholder proposals to massively force boards of directors to amend charters to strengthen shareholder rights. In contrast, shareholder proposals have (so far) been relatively rare in Europe. Is the American abundance of successful shareholder proposals the epitome of strong shareholder power? This chapter critically analyzes the role of such shareholder proposals and their effects on shareholder power and warns of too much euphoria. A comparative analysis of shareholder proposal rights and substantive shareholder rights yields two important lessons. First, shareholder power related proposals in American companies are essentially closing the gap in substantive shareholder power that existed between the United States and Europe, an evolution to which developments in the opposite direction in Europe are contributing as well. Second, empirical data on shareholder proposals in the United States and Europe are barely comparable, due to the different purposes for which such proposals are used on both sides of the Pond, differences in prevailing ownership structures and in the average size (in terms of market capitalization) of listed companies, etc.