Law Commons^™

Common Ownership: Do Managers Really Compete Less?, Merritt B. Fox, Manesh S. Patel

Faculty Scholarship

This Article addresses an important question in modern antitrust: when large investment funds have holdings across an industry, is competition depressed?

The question of the impact of common ownership on competition has gained much attention as the role of institutional shareholding has grown, with the funds of the three largest management companies holding in aggregate approximately 21% of the shares of a typical S&P 500 firm. It is a source of acute disagreement among scholars and policymakers, with some who believe common ownership does depress competition seeking antitrust law reforms that would significantly constrain how investment funds operate. Neglected in …

Nonvoting Shares And Efficient Corporate Governance, Dorothy S. Lund

Faculty Scholarship

A growing number of technology companies, including Google, Zillow, and Snap, have issued stock that does not allow investors to vote on corporate decisions. But there is fundamental disagreement among scholars and investors about whether nonvoting stock is beneficial or harmful. Critics argue that nonvoting shares perpetually insulate corporate insiders from influence and oversight, and therefore increase agency costs. By contrast, proponents contend that nonvoting shares may provide benefits that exceed these agency costs, such as enabling corporate insiders to pursue their long-term vision for the company without interference from outside shareholders.

This Article offers a novel perspective on this …

The Case Against Passive Shareholder Voting, Dorothy S. Lund

Faculty Scholarship

American investors have begun to embrace the reality that academics have been championing for decades — that a broad-based, passive indexing strategy is superior to picking individual stocks or investing in actively managed funds. But there are several reasons to believe that the rise of passive investing will have harmful consequences for firm governance, shareholders, and the economy. First, because passive funds seek only to match the performance of an index — not outperform it — they lack a financial incentive to ensure that each of the companies in their very large portfolios are well-run. Second, passive funds face an …

A Private Ordering Solution To Blockholder Disclosure, Joshua Mitts

Faculty Scholarship

The recent debate over reforming the Securities Exchange Act section 13(d) ten-day filing window demonstrates the importance of balancing the costs and benefits of delayed blockholder disclosure. While hedge fund activism may create shareholder value, short-termism is a very real problem for firms today. Rather than a rigid mandatory rule, the duration of the blockholder disclosure window should be set through a shareholder amendment to the corporate bylaws that empowers shareholders to set an optimal maximum length for each firm. To internalize the economic and moral costs to society of permitting trading on asymmetric information, the SEC should impose a …