Shareholder vs. Investor Primacy in Federal Corporate Governance

This essay questions the notion that recent federal corporate governance regulation reflects the shareholder primacy model of corporate governance and argues that, instead, such regulation comports more closely with the investor protection norm embedded in the federal securities laws. A key to the argument is the distinction between "shareholders" and "investors," which are overlapping but distinct groups with different functions, powers, and governance rights. Using a series of examples, the essay shows that recent federal corporate governance provisions and initiatives are best viewed as a means of ensuring that investors are able to participate in the markets for debt and equity securities on the basis of adequate and accurate information, and that these same provisions and initiatives have not accorded any unique and meaningful governance rights to shareholders alone (with say-on-pay rules proving no exception). The essay does not dispute that shareholders as a class have expanded their power and influence in corporate affairs in recent years; it simply argues that this has not been the direct result of federal corporate governance regulation which, as a descriptive matter, has prized the interests of all investors over those of shareholders alone