Shareholder Bylaws: Mechanics, Limitations and Pragmatic Benefits

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2 Responses

  1. Lawrence Cunningham says:

    Excellent post and work. Is the optional by-law route intended as an alternative to the federal securities regulation approach being championed by Robert Jackson, Lucian Bebchuk and others?

  2. Jay Kesten says:

    Lawrence — thanks! Yes, I view this approach as a preferable alternative to mandatory regulation through the securities laws. Corporate political activity poses real corporate governance concerns, but there’s also substantial empirical uncertainty about the consequences of various forms of internal regulation. In those circumstances, I think a cautious but enabling approach is best.

    Disclosure is probably a good idea for most companies, but I’m skeptical of a static, uniform and mandatory rule. Also, in the aftermath of Business Roundtable, I worry about the efficacy of SEC regulation in any event. Plus, for some companies, disclosure may not be enough; shareholders may want or need additional ex ante control over political activity. But, I’m leery of imposing mandatory rules (or drastically changing the current corporate law defaults) in this regard as well.

    I also think there may be an important expressive effect in telling shareholders that they are entitled to make this choice for themselves.