Today's speaker at my seminar is my friend and UCLA colleague Iman Anabtawi. Iman teaches in the Corporate Law Concentration with an emphasis on teaching transactional skills in courses such as Venture Capital Financing Transactions and Mergers and Acquisitions Transaction Planning.
At Oxford University, Professor Anabtawi was a Marshall Scholar, receiving an M.A. (in philosophy, politics, and economics). At Stanford Law School, she was articles editor of the Stanford Law Review, won the Hilmer Oehlmann, Jr. First Year Writing Award, and received the John M. Olin Prize in Law and Economics. She clerked for the Honorable Laurence H. Silberman of the U.S. Court of Appeals for the D.C. Circuit, and then Justice Sandra Day O'Connor of the U.S. Supreme Court. She then practiced for eight years with the firm of O'Melveny & Myers, where she consecutively held the positions of Tax Associate (Transactional Tax); Corporations Associate; and Special Counsel, Corporations Department. During this time, she specialized in mergers and acquisitions, joint ventures and strategic alliances, funds and acquisition vehicles, and financial products, as well as general corporate representation.
Anabtawi will be presenting her paper SOME SKEPTICISM ABOUT INCREASING SHAREHOLDER POWER.
Abstract: This Article examines shareholder primacists' claims that making boards more accountable to shareholders would go a long way toward solving the agency problem between shareholders and managers and enhancing shareholder welfare. I argue that in the shareholder power debate over whether to vest corporate decisionmaking authority primarily in a firm's shareholders or in its board of directors, shareholder primacists underplay deep rifts among the interests of large-block shareholders - those shareholders most likely to make use of increased shareholder power. The argument for reapportioning decisionmaking authority within the firm away from boards toward shareholders assumes that shareholders are a monolith with the single, overriding objective of maximizing share value. Some of the most significant modern shareholders, however, have private interests that conflict with (1) the goal of maximizing shareholder value generally or (2) the interests of other shareholders who would choose to maximize shareholder value differently, given their peculiar characteristics. Such private interests may induce influential shareholders to engage in rent-seeking behavior at the expense of overall shareholder welfare. In light of this possibility, which I argue is substantial, we would do well to pause before implementing corporate governance measures designed to further empower shareholders.
FYI: Anabtawi's paper is, in considerable measure, a critique of Harvard law professor Lucian Bebchuk's article THE CASE FOR INCREASING SHAREHOLDER POWER. My article, Director Primacy and Shareholder Disempowerment, which is forthcoming in the Harvard law Review, is also a response to Bebchuk's argument.
Abstract: This essay is a response to Lucian Bebchuk's recent article The Case for Increasing Shareholder Power, 118 Harvard Law Review 833 (2005). In that article, Bebchuk put forward a set of proposals designed to allow shareholders to initiate and vote to adopt changes in the company's basic corporate governance arrangements. In response, I make three principal claims. First, if shareholder empowerment were as value-enhancing as Bebchuk claims, we should observe entrepreneurs taking a company public offering such rights either through appropriate provisions in the firm's organic documents or by lobbying state legislatures to provide such rights off the rack in the corporation code. Since we observe neither, we may reasonably conclude investors do not value these rights. Second, invoking my director primacy model of corporate governance, I present a first principles alternative to Bebchuk's account of the place of shareholder voting in corporate governance. Specifically, I argue that the present regime of limited shareholder voting rights is the majoritarian default and therefore should be preserved as the statutory off-the-rack rule. Finally, I suggest a number of reasons to be skeptical of Bebchuk's claim that shareholders would make effective use of his proposed regime. In particular, I argue that even institutional investors have strong incentives to remain passive.
For a broad overview of the law and economics of shareholder voting rights, see my article The Case for Limited Shareholder Voting Rights, which is forthcoming in the UCLA Law Review.
