A Corporation is Not a Democracy

The case for limits on shareholder voice

Shareholder democracy has been haunting my news feed aggregator for the last week.

At JOTWELL, Tom Lin reviewed Sergio Alberto Gramitto Ricci, Daniel J.H. Greenwood, & Christina M. Sautter, The Shareholder Democracy Lie, 78 Fla. L. Rev. __ (forthcoming 2026), available at SSRN (Feb. 18, 2025).

The authors argue that the noble rhetoric of shareholder democracy does not reflect legal, institutional, and historical realities—and that this rhetorical distortion carries real consequences for corporate governance, political legitimacy, and social progress. …

The authors demonstrate that the rhetoric of shareholder democracy, far from being innocuous, helps legitimize and entrench corporate power in ways that distort democratic governance and public policymaking.

When I first saw the paper last spring, I wrote on Linkedin that I agreed with them that shareholder democracy is a lie, but that “I think we should celebrate that fact.”

Longtime shareholder gadfly activist James McRitchie posted “Shareholder Participation in Corporate Governance Brings Agency and Other Benefits” to The CLS Blue Sky Blog, in which he argues that:

Critiques of both ESG and anti-ESG shareholder proposals provide a valuable opportunity to clarify what matters in modern corporate governance: active shareholder participation, empirical evidence, and a holistic understanding of risk. While Michael Levin and others rightly highlight the enduring strength of governance proposals, dismissing environmental and social (E&S) initiatives as symbolic overlooks a growing body of evidence and the real-world role shareholders play in compensating for government inaction and market failures.

At TheCorporateCounsel.net Blog, John Jenkins posted some thoughts on the implications of Texas v. BlackRock for shareholder engagement:

Last month, a Texas federal court refused to dismiss the state’s antitrust claims against BlackRock, Vanguard and State Street associated with their engagement with portfolio companies on ESG-related matters. This Cleary memo says that the Court’s decision is going to add another layer of complexity to engagements between companies and shareholders.

Idaho law professor Wendy Gerwick Couture posted “Why Delaware Should Narrow Its Definition of Pre-Suit Demand” to The CLS Blue Sky Blog:

The Delaware courts’ current definition of pre-suit demand – which requires merely that the communication state “the legal action the shareholder wants the board to take on the corporation’s behalf” – reaches broadly enough to include not only communications demanding litigation on behalf of the corporation, but also communications demanding other corrective action that would benefit the corporation. ...

This expansive definition of pre-suit demand stifles shareholder voice, undercutting shareholder monitoring and information-sharing within the firm.

Among corporate law scholars, I stand alone for the most part as a critic of shareholder voice and activism. Put simply, a corporation is not a New England town meeting.

The statutory design is for board-centric governance in which shareholders have sharply limited participation rights. Seeking to weaken those limits goes against the foundational principles that make corporations work.