This paper reconsiders the basic allocation of power between management and shareholders in publicly traded companies. U.S. corporate law, taking a different approach from that of other common law countries, has long precluded shareholders in such companies from directly intervening in any major corporate decisions. Management power and shareholder weakness in these companies is not largely an inevitable product of the dispersion of ownership, but are partly due to the legal rules that insulate management from shareholder intervention. I argue that the case for such legal rules is hardly compelling, and I put forward a regime in which shareholders have the power to initiate, and approve by vote, major corporate decisions.Providing shareholders with the power to intervene can significantly address important governance problems that have long occupied the attention of corporate law scholars and financial economists. In particular, shareholder power to make "rules of the game" decisions to amend the corporate charter or change the state of incorporation would ensure that corporate governance arrangements change over time in ways that serve shareholder interests. Shareholder power to make " game ending" decisions to merge, sell all assets, or dissolve would address managers' excessive tendency to retain their independence. Finally, Shareholder power to make "scaling down" decisions to contract the company's size by ordering a cash or in kind distribution would address problems of empire building and free cash flow. A regime with shareholder power to intervene, I conclude, is an attractive option that should be seriously considered.
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