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- Title
ADDRESSING CORPORATE SHORT-TERMISM THROUGH LOYALTY SHARES.
- Authors
QUIMBY, P. ALEXANDER
- Abstract
The classic concept of patient investing and long-term corporate governance has largely disappeared. Dispersed investors with long-term investment horizons have been replaced by concentrated institutional investors, which trade and control corporations solely for the short- term. This new model of investment and corporate governance (deemed "short-termism") has a negative impact on society as a whole and has been blamed for recent financial crises and a lack of investment in research and development. Although others have addressed short-termism, their efforts generally avoid providing actual solutions to the problem. This Note fills that void: it provides a model for promoting long-term investment and corporate governance, while not eliminating the benefits conferred by short-term trading. This goal can be accomplished by making a "loyalty shares"provision available to public corporations. By adopting a loyalty shares provision, the gains generated from the sale of that corporation's stock would be subject to a periodically reduced capital gains tax rate over time, while the voting rights attached to that stock would be periodically enhanced over time. Adoption of the provision would entice more shareholders to invest for the long-term, while also increasing these long-term shareholders' control over the corporation. Mindful of the experiences of European and Canadian companies that use other types of control-enhancing mechanisms, this proposal contains several features which avoid the pitfalls inherent in an uncapped system of enhanced voting rights.
- Subjects
CORPORATE governance; INDUSTRIAL management; SHORT term planning; CORPORATION law; STOCKS (Finance); LOYALTY
- Publication
Florida State University Law Review, 2013, Vol 40, Issue 2, p389
- ISSN
0096-3070
- Publication type
Article