The Case for Empowering Quality Shareholders

Authors

Lawrence A. Cunningham

Abstract

Anyone can buy stock in a public company, but not all shareholders are equally committed to a company’s long-term success. In an increasingly fragmented financial world, shareholders’ attitudes toward the companies in which they invest vary widely, from time horizon to conviction. Faced with indexers, short-term traders, and activists, it is more important than ever for businesses to ensure that their shareholders are dedicated to their missions. Today’s companies need "quality shareholders," as Warren Buffett called those who "load up and stick around," or buy large stakes and hold for long periods.

While scholars in recent years have extensively debated indexers, short-term traders, and activists, they have paid scant attention to quality shareholders and their critical role in corporate finance and governance. This Article corrects this oversight by highlighting the quality shareholder cohort. Adding this fresh perspective confirms some of the angst about myopic short-termism on the one hand and ignorant indexing on the other, but rather than suggesting tighter regulation of such behaviors, the reframing invites attention to empowering quality shareholders. In particular, rather than taxing short-term shareholders or passing through indexer voting rights, this Article explains how companies could simply increase the voting power of their quality shareholders to recognize their value and to attract them.

Rights

© 2021 Brigham Young University Law Review

Recommended Citation

Lawrence A. Cunningham, The Case for Empowering Quality Shareholders, 46 BYU L. Rev. 1 (2021).
Available at: https://digitalcommons.law.byu.edu/lawreview/vol46/iss1/5