Thursday, February 15,
2018 09.13AM / Kara M. Stein, SEC Commissioner’s Remarks At Stanford
Thank you, Professor [Anat] Admati,
for that kind introduction. It is a pleasure to be with you this evening, and I
would like to thank the Corporations and Society Program and the Rock Center
for Corporate Governance for inviting me to visit with you. In particular, I
would like to thank Professors [Anat] Admati and [Joe] Grundfest for extending
to me such a warm welcome.
Before I go further, I must state that
the views I express today are my own, and do not necessarily reflect those of
my fellow Commissioners or the SEC staff.
Tonight, I want to talk to you about
something that has been vigorously debated in recent years: What is, and what
should be, the role of the corporate shareholder? In the spirit of being in
California, this debate could be summarized as follows: Are shareholders merely
extras in the corporate movie? Or are they lead actors that need to be empowered
so that they can successfully play their roles? However, as most people in this
room know, it is actually much more complicated than that. It is not, and
should not be conceptualized as, a binary choice. Rather, I would posit that
the entire corporate ecosystem’s success actually rests on effective
communication and collaboration between corporations and their shareholders.
When a company, its management, its shareholders, and its employees work
together, companies tend to be more resilient and prosperous. In turn, this
benefits companies, their corporate stakeholders, and the economy as a whole.
Today’s corporations influence and
impact our society in a multitude of ways. Corporations help grow our economy,
provide well-paying jobs, and provide earnings to investors saving for
retirement, college, or a new home. Many companies, whether small or large, are
helping to drive our society forward, developing new technologies that are
raising our living standards, improving our environment, and lengthening our life
span. Corporations hold some of our most precious assets, such as medical
histories, consumer bank account information, addresses, and other sensitive
information. They also are central players in some of our most immediate
problems, such as global warming.
Corporations have shaped, and will
continue to shape, our society, our identities, and our relationships with one
other. This week’s series seeks to promote a discussion of the
interrelationship and interdependency between corporations and our society.
Pretty heady stuff, to be sure, but extremely important. Not only from an
academic point of view, but from a practical and policy point of view, as well.
So, I thought I would start off our
discussion tonight by talking a bit about the science of “mutualism.” For those
of you not familiar with the concept, mutualism is a symbiotic relationship
between individuals of different species in which both benefit from the
association. One example of mutualism is the relationship between bees and
flowers. Bees fly from flower to flower gathering nectar to make food. By
flying from flower to flower, bees pollinate the plants on which they land.
Bees get to eat, and the flowering plants get to reproduce. Bees help plants
grow, thus supporting other animals, including us humans. The bee-flower
relationship is integral to our entire food chain, and our larger ecosystem.
The relationship between a company and
its shareholders is rooted in a similar form of mutualism. Shareholders invest
their savings or capital in a company. The company then deploys the capital to
fund its operations. This allows the corporation and its shareholders’
investments to grow. This corporation-shareholder relationship is likewise part
of a larger ecosystem. When all goes well, more employees and managers get
hired, and the company produces more products or provides more services, all of
which benefits the entire economy.
Unfortunately, the relationship
between corporations and their shareholders may be moving away from its origins
and becoming less mutualistic. This, I believe, may harm companies and their
shareholders, as well as those who depend on the health of the
So, how do we restore mutualism in the
relationship upon which our corporate ecosystem is based?
AND THE CORPORATION-SHAREHOLDER RELATIONSHI
I recently remarked upon the history
of the American corporate form, and I would like to start my talk tonight
there, as well. Don’t
worry, I won’t go as far back as the Dutch East India Company and its participanten, or the tulip
Rather, I will quickly touch upon the history of the corporation-shareholder
relationship in the United States to inform the rest of our discussion. From the late-1700s to the mid-1800s,
corporations started to flourish in the United States.
American companies typically operated within a single state or community. The
shareholders of a corporation were often members of the same community in which
the corporation was located. As a result, they were able to engage and monitor
the company’s business affairs in a more direct manner than we currently see
today. A corporation also met with its shareholders more frequently, whether in
the form of shareholders’ meeting or otherwise. Beginning in the mid-1800s, however,
companies started growing larger and the corporate form changed.
Companies began hiring managers—who often had no ownership interest in the
companies—to run their affairs. While this transition created certain
also in many cases separated the ownership of the company from the management
of the company. This had the effect of reducing shareholders’ ability to
directly influence the company’s business.
Mutualism and the
Corporation-Shareholder Relationship in Recent Years
A lot has happened since the
mid-1800s, and we are now at a tipping point. Instead of being in the midst of
an industrial revolution, we are in the midst of a digital revolution. This new
revolution comes with many benefits—speed, efficiency, and innovation, to name
only a few. Coupled with these benefits, however, are also some risks. I think
if we focus on the strengths of the American corporate form, we can
successfully reimagine the corporation-shareholder relationship for the Digital
I would like to discuss a few examples
of how, in modern corporate governance, the concept of mutualism can help us
think through the path forward for corporations, their shareholders, and the
larger corporate ecosystem.
As we all know, the digital
transformation is providing both companies and shareholders with tremendous
opportunities. However, one of the biggest challenges facing corporations and
their shareholders, their employees and consumers, and our economy as a whole,
is cybersecurity. As we
have learned, cyberattacks can affect millions of people at once and
potentially compromise our most sensitive personal information. Shareholders have been out front
advocating for more information on company practices relating to cybersecurity. The
number of shareholder proposals regarding cybersecurity has increased in recent
good information remains scarce. Unfortunately, corporate disclosures are far
from robust and largely consist of boilerplate language that fails to provide
meaningful information for investors.
While companies and shareholders agree
that cybersecurity is one of the most prominent corporate issues of our time,
it is unclear why companies are not doing more to implement robust
cybersecurity frameworks and to provide meaningful disclosures regarding the
risks of data loss.
Companies and their intermediaries
tend to view cyberthreats as a technology problem instead of, more
appropriately, a business risk. As we have seen time and time again,
cybersecurity, and the related threats of unintentional loss of data, is a
governance challenge for all of us, and it requires a change in culture and
approach. Many shareholders seem to understand this and have been urging, and
continue to urge, companies to engage.
Regulators are certainly not immune
from facing these challenges. In August 2017, I learned for the first time that
the Commission’s official record system was breached in 2016, and that this
breach may have provided the basis for illicit gains through trading.
Clearly, the Commission’s enterprise risk management processes failed to
adequately address appropriate escalation protocols. Once he was informed,
Chairman Clayton immediately launched an investigation into the breach and has
focused the Commission and the staff on improving our risk management
framework. Companies, their managers, their
boards, as well as their regulators, all need to do a better job in recognizing
and addressing the significant risks that can result from the loss of data.
Breaches of security measures can result in theft, reputational harm, or the
loss of intellectual property. Simply put, the unintentional loss of data may
have material effects on companies. Slowly, regulators around the globe are
stepping up to the challenge of issuing data protection laws and regulations.
The approach to these issues continues to evolve with the changing landscape.
For example, the European Union’s General Data Protection Regulation is set to
go into effect in May 2018.
China has begun enforcing regulations concerning “critical information infrastructure.” Last
March, the New York Department of Financial Services required that regulated
firms name a chief information security officer (or CISO). These CISOs must
provide an annual report on cybersecurity to the firm’s board. Last
year, a bipartisan bill was introduced in the Senate to require publicly traded
companies to disclose whether any members of their board have cybersecurity
expertise. We at the Commission have not yet
adequately pressed forward. While the Commission’s staff has released disclosure
guidance for public companies to consider when dealing with cyberrisks and
Commission can and should do more. I believe the Commission should consider
rules to require disclosure of a firm’s enterprise-wide consideration of
cyberrisks. I also believe that we should develop rules to ensure that market
intermediaries, including broker-dealers and investment advisers, develop and
implement policies and procedures to protect investors’ personal information.
The security and integrity of a
corporation’s assets, like the SEC’s, is a great responsibility. As I said
earlier, cybersecurity has been viewed by many as simply an “IT” problem,
hoisted on the shoulders of a company’s chief information officer. Too often,
this has led to a failure to integrate cybersecurity into a firm’s enterprise
risk management framework. To be sure, some companies are focused on
cyberthreats and recognize their potential economic threat. But companies need
to do more than simply recognize the problem. They need to heed the calls of
their shareholders and treat cyberthreats as a business risk. Corporations and
shareholders will both benefit from greater transparency and focus on the risks
related to unintended data loss and the collateral consequences.
The composition of corporate boards
provides another example of how the concept of mutualism is informative. Boards
can and should be a bridge to investors, but too often they are a wall. Board
composition is vitally important as directors play a meaningful role in helping
companies make productive investments and good decisions going forward.
However, boards remain far from diverse or reflective of shareholders’ views
despite evidence pointing to the value of such diversity in their composition.
Gender diversity on boards provides a
notable example. This is not about making people feel good—it is about dollars
and cents. Studies suggest that women may be better monitors of executives, a
central function of boards of directors.
Research has also shown that companies with strong female leadership generated
higher returns on equity compared to those without. This
may be because having a diverse board helps the company better understand
purchasing and usage decisions by its clients or customers. Studies have found,
after all, that women drive 70% to 80% of purchasing in the United States. As I
have remarked in the past, diverse boards also appear to deter “groupthink” and
help reduce instances of fraud, forms of corruption, and shareholder contests. The
Commission and regulators across the globe have also echoed the importance of
gender diversity on boards. Despite all of this, gender diversity
on boards remains elusive. The
percentage of women on boards is currently at approximately 20%, an increase of
only 5% since 2011. This
is striking when you consider that women make up 50.5% of the U.S. population and
approximately 47% of the U.S. labor force.
Indeed, the United States lags behind many advanced ecomies in terms of
women’s representation on corporate boards. More striking still, it is not just
academics and think tanks that support gender diversity on boards.
Shareholders, too, expect the companies they own to have diverse board
membership. For example, State Street Global Advisors and
adopted policies or guidance with respect to increasing gender diversity on
boards, and indicated their willingness to use their voting power to effect
change, if necessary. Yet, despite the documented benefit of
diverse boards, many board members do not believe that board diversity enhances
Further, more than half of directors believe that their boards are already
It is one thing for boards to ignore
scholarly research, but it is quite another for boards to ignore their
companies’ shareholders or owners. Especially when it can affect everyone’s
Although we have come a long way since
the 18th Century, we still have a long way to go. How can technology
help this process? Can it be used to better connect a company and its board
with its shareholders? How can a corporation capitalize on mutualism and
benefit from the best ideas of its shareholders for the benefit of all?
Changes in the corporation-shareholder
relationship are perhaps most apparent when looking at efforts to curtail
shareholders’ information and rights. As owners of a company, shareholders
actually care about corporate practices of all types and how they affect the
bottom line—from strategic plans to employee relations to executive
compensation, and much more. So-called shareholder activism can provide a
necessary check on a company’s leaders. Or
it can be a needless expense for a company ultimately producing no benefit.
Whatever your opinion, shareholder activism seems to be here to stay, with 39%
of directors believing that there will be an increase in shareholder activism
in 2018. In recent years, shareholder activism
has prompted myriad responses from corporate boards and management. Many
simply try to fend off shareholders. Many engage with shareholders, but because
about 70% of the share ownership of U.S. companies is from huge investors, that
is where they focus.
Thus, the entire battle is fought for the opinions of a handful of executives
at large asset managers.
Though the decision to engage
institutional shareholders may simply be a matter of numbers, what are the
long-term effects on the company
of this sort of narrow shareholder engagement? Does
engaging the view of only one group of shareholders result in a form of
short-termism? Could it result in a company putting on blinders that can affect
its long-term bottom line? Ultimately, how does this sort of one-sided
engagement affect the company’s position in the larger ecosystem?
In effect, is shareholder activism a
symptom of an underlying problem or part of the cure? I believe that we need to
get back to a more mutualistic relationship in order to properly answer that
Another place where the concept of
mutualism needs to be considered is in regard to dual-class capital structures,
where certain shareholders are starting to be disenfranchised by design.
As you know, in typical dual-class
capital structures, corporate insiders receive common stock with multiple votes
per share while public shareholders receive shares with one vote per share. This structure allows these corporate
insiders to control a majority of the votes of the corporation even though they
own a minority of its stock.
While dual-class capital structures have existed for many years, much
has been written about them recently. This may be in part because of an upsurge
in dual-class IPOs—from Google in 2004 to Manchester United in 2012. And we all
have heard about Snap and its IPO of non-voting
shares in 2017. Many, including myself, see dual-class
capital structures as inherently undemocratic, disconnecting the interests of a
company’s controlling shareholders from its other shareholders. The
disassociation of interests can grow over time when certain shareholders, but
not others, have the right to vote over fundamental corporate matters—like
board members. It
is not surprising, then, that critics include shareholder groups, asset
managers, and stock indices. Or
that they are prohibited by some countries. Yet,
we are still inexplicably letting dual-class share structures persist.
Why does the appetite for dual-class
capital structures exist despite wide investor disapproval of such structures?
Where is the symbiosis? Can investors afford not to invest in another Google,
even if they do not agree with the share structure? What leverage do they have?
What happens when the interests of a company’s controlling shareholders
continue to diverge from its other shareholders? Is there a risk that a
company’s controlling shareholders will acquire conflicts of interest so large
that the company cannot act in the best interests of all of its shareholders?
While some say dual-class capital
structures are designed to prevent a takeover or shareholder activism, they
also may provide a means to evade management and board accountability.
Structures where a minority of insiders lock out the interests and rights of
the majority may also have collateral effects on our capital markets. They may
be harmful not just for those companies, their shareholders, and their
employees, but for the economy as a whole. Dual-class capital structures, in
effect, turn the mutualism underlying the corporation-shareholder relationship
on its head.
While it is clear that the
relationship between a company and its shareholders is currently in flux, it is
less clear how we should move forward. How can we restore the mutualism that
serves as the foundation for the corporation-shareholder relationship, and that
has benefited companies, their shareholders, and the economy as whole since the
Shareholder empowerment is key. As I
have discussed tonight, the benefits of shareholder involvement are not
abstract. Shareholders often fight for corporate values—such as diverse
boards—that empirically have positive, direct effects on the corporate bottom
line. They often do this well before managers or boards are willing to consider
or implement such changes. Despite this, corporations appear to be searching
for ways to ignore shareholders, even on a structural level.
Shareholder engagement is, I believe,
a good first step in enhancing the corporation-shareholder relationship for the
benefit of both. Despite the trends toward a less mutualistic relationship,
there are some positive signs. For example, companies and their shareholders
are increasingly sitting down at the same table these days.
Companies are also hiring advisors to help them engage directly and
consistently with their shareholders. This
has allowed companies to have a continuing dialogue with their shareholders. Many companies are also utilizing
technology to better facilitate engagement with their shareholders. From
hosting virtual or live webcasts of their shareholder meetings, to using social
media and mobile technology, companies are searching for new and better ways to
actively engage their shareholders. Unfortunately, this shareholder
engagement has largely been geared toward those with the most voting power.
Companies can also benefit from the engagement of retail investors. And, as I
have said before, technology can also serve this purpose. After all, more
Americans are technology-literate than ever before.
Indeed, approximately 80% of Americans had a social media profile in 2016.
Perhaps, shareholders should be allowed to vote through social media or a
mobile phone application, like in Estonia. New and cutting-edge technologies may
help in other ways. Companies might be able to use distributed ledger or
blockchain technology to identify and reach their shareholder bases more
Currently, companies mainly communicate with shareholders through broker or
bank intermediaries, because the shares are held in the names of these
intermediaries rather than in the names of the beneficial owners. This means
that, in some cases, companies do not actually know who their shareholders are.
While this complex construct may have been necessary in the 1970s, current
technology could enable companies to directly communicate with shareholders
without the need for intermediaries. The Commission can do more, too. While
we have issued rules that shape the means by which a company communicates with
its shareholders, we
should continue to be ready to help fortify the corporation-shareholder
relationship as we move forward. For example, we should adopt final rules
regarding the use of universal proxy cards.
These rules should recognize that few shareholders can dedicate the time and
resources necessary to attend a company’s meeting in person and that, in the
modern marketplace, most voting is done by proxy. The Commission’s rules need
to change to reflect our current reality, empowering companies and shareholders
In a time when ownership is global and
disparate, the use of technology and the Commission’s rules are simply tools to
further the empowerment of a corporation’s owners. We have seen throughout
history that a company’s growth and its owners’ prosperity are often enhanced
by direct engagement. In other words, both engaging with one another for the
good of all, or mutualism. The result is a corporation that is more nimble and
grows in an ecosystem that thrives on transparency. This was true in the 1700s
and it is still true today.
As we move forward, we have to ask
ourselves how we can strengthen the corporation-shareholder relationship. For
it has been foundational to the success of the American corporate form.
As I have discussed tonight, the
corporation-shareholder relationship must be reimagined in the context of
modern corporate governance to recapture its benefits. Shareholders, like
management, share the desire to grow a company’s bottom line. But they can only
help if they are heard.
We need to go back to first
principles: A corporation’s growth and its shareholders’ prosperity are
intertwined. To succeed, they must work together.
Thank you for your time, and for
inviting me to speak with you this evening.
 See J. Matthijs de Jongh, Shareholder Activism at the Dutch East
India Company 1622 – 1625, Paper presented at the Conference on the
Origins & History of Shareholder Advocacy, Yale School of Management,
Millstein Center for Corporate Governance and Performance, November 6–7, 2009, available at http://www.shareholderforum.com/access/Library/20100110_Jongh.pdf . See
also 1602 Trade with the East: VOC, available at https://www.rijksmuseum.nl/en/rijksstudio/timeline-dutch-history/1602-trade-with-the-east-voc .
 See Ralph Gomory & Richard
Sylla, The American Corporation,
142 Dædalus 102 (2013) (“American Corporation”), available at https://www.amacad.org/content/publications/pubContent.aspx?d=1053 .
 See American Corporation.
 See American Corporation; Adolf
A. Berle & Gardiner C. Means, The Modern Corporation and Private Property
(Routledge 2d Ed. (Feb. 1991)) (“Modern Corporation”).
 See American Corporation;
 See Modern Corporation. See also James P. Walsh &
James K. Seward, On the
Efficiency of Internal and External Corporate Control Mechanisms,
15 Academy of Mgmt. Rev. 421 (1990), available
at http://jamespwalsh.com/Resources/Walsh%20and%20Seward%20-%201990%20-%20On%20the%20efficiency%20of%20internal%20and%20external%20corporate%20control%20mechanisms.pdf .
 See American Corporation.
 See, e.g., Priya Anand, “NYSE
releases a cybersecurity guide for public companies,” MarketWatch (Oct. 14, 2015), available at https://www.marketwatch.com/story/nyse-releases-a-cybersecurity-guide-for-public-companies-2015-10-14 .
 See, e.g., Tara Bernard et al., “Equifax Says Cyber
Attack May Have Affected 143 Million in the U.S.,” The New York Times (Sept. 7, 2017), available at https://www.nytimes.com/2017/09/07/business/equifax-cyberattack.html ; Kevin McCoy, “Target to pay $18.5M for
2013 data breach that affected 41 million consumers,” USA Today (May 23, 2017), available at https://www.usatoday.com/story/money/2017/05/23/target-pay-185m-2013-data-breach-affected-consumers/102063932/ .
 See, e.g., Allison Grande,
“Apple Shareholders Join Push For Cybersecurity Disclosures,” Law360 (Sept. 25, 2012), available at https://www.law360.com/articles/381390/apple-shareholders-join-push-for-cybersecurity-disclosures .
 See, e.g., Laura D. Richman
& Michael L. Hermsen, “2016 Proxy Season Update,” Harvard Law School Forum on Corporate
Governance and Financial Regulation (Oct. 13, 2015), available at https://corpgov.law.harvard.edu/2015/10/13/2016-proxy-season-update/ .
 See, e.g., U.S. Securities and
Exchange Commission Cybersecurity Roundtable, Transcript (Mar. 26, 2014), available at https://www.sec.gov/spotlight/cybersecurity-roundtable/cybersecurity-roundtable-transcript.txt.
 See Chairman Jay Clayton,
Statement on Cybersecurity (Sept. 20, 2017), available
 See European General Data
Protection Regulation (GDPR), available
at http://ec.europa.eu/justice/data-protection/reform/files/regulation_oj_en.pdf .
 See, e.g., Sarah Zhao, Sally
Qin & Stephanie Sun, “An Update On China's Cybersecurity Law, 3 Months In,”
Law360 (Sept. 8,
2017), available at https://www.law360.com/articles/960697/an-update-on-china-s-cybersecurity-law-3-months-in .
 See, e.g., Liz Skinner, “New
cybersecurity regulation hits New York financial firms March 1,” InvestmentNews (Jan. 17, 2017), available at http://www.investmentnews.com/article/20170117/FREE/170119938/new-cybersecurity-regulation-hits-new-york-financial-firms-march-1 .
 See Cybersecurity Disclosure
Act of 2017, S. 536, 115th Cong., available
 See CF Disclosure Guidance:
Topic No. 2, Cybersecurity, Division of Corporation Finance (Oct. 13, 2011), available at https://www.sec.gov/divisions/corpfin/guidance/cfguidance-topic2.htm.
 See Renee Adams & Daniel
Ferreirra, Women in the Boardroom
and their Impact on Governance and Performance, 94 J. of Fin. Econ.
291 (2009), available at
 See Linda-Eling Lee et al., Women on Boards: Global Trends in Gender
Diversity on Corporate Boards, MSCI ESG Research Inc. (Nov. 2015)
(“MSCI Women on Boards”), available
at https://www.msci.com/documents/10199/04b6f646-d638-4878-9c61-4eb91748a82b .
 See Erica Hersh, “Why Diversity
Matters: Women on Boards of Directors,” Harvard T.H. Chan School of Public
Health Executive and Continuing Professional Education, available at https://www.hsph.harvard.edu/ecpe/why-diversity-matters-women-on-boards-of-directors/ .
 See, e.g., Commissioner Kara M.
Stein, “Toward Healthy Companies and a Stronger Economy,” Remarks to the U.S.
Treasury Department’s Corporate Women in Finance Symposium (Apr. 30, 2015), available at https://www.sec.gov/news/speech/stein-toward-healthy-companies.html.
 See, e.g., Item 407(c) of
Regulation S-K [17 CFR 229.407(c)]; Claire Zillman, “The EU Is Taking a Drastic
Step to Put More Women on Corporate Boards,” Fortune
(Nov. 30, 2017), available at
 See, e.g., Julie Daum, Laurel
McCarthy & Ann Yerger, “Board Composition: A Slow Evolution,” Harvard Law
School Forum on Corporate Governance and Financial Regulation (Dec. 26, 2017), available at https://corpgov.law.harvard.edu/2017/12/26/board-composition-a-slow-evolution/ .
 See Report by 2020 Women on
Boards Gender Diversity Index: 2011–2017 Progress of Women Corporate Directors
by Company Size, State and Sector, available
at https://www.2020wob.com/sites/default/files/2020WOB_GDI_Report_2017_FINAL.pdf .
 See “Population, female (% of
total),” The World Bank, available
at https://data.worldbank.org/indicator/SP.POP.TOTL.FE.ZS .
 See Mark DeWolff, “12 Stats
About Working Women,” U.S. Department of Labor Blog, available at https://blog.dol.gov/2017/03/01/12-stats-about-working-women.
 See Claire Cain Miller, “Women
on Boards: Where the U.S. Ranks,” The
New York Times (Mar.10, 2015), available
at https://www.nytimes.com/2015/03/11/upshot/women-on-boards-where-the-us-ranks.html?_r=0 .
 See SSGA’s Guidance on
Enhancing GenderDiversity on Boards (Mar. 7, 2017), available at https://www.ssga.com/investment-topics/environmental-social-governance/2017/guidance-on-enhancing-gender-diversity-on-boards.pdf .
 See Investment Stewardship
Report: Americas Q2 2017 (Jun. 30, 2017), available
at https://www.blackrock.com/corporate/en-br/literature/publication/blk-qtrly-commentary-2017-q2-amers.pdf ; Emily Chasan, “BlackRock Puts Its Votes
Behind Proposals to Get Women on Boards,” Bloomberg
(Jul. 13, 2017), available at
 See “The governance divide:
Boards and investors in a shifting world,” PwC’s 2017 Annual Corporate
Directors Survey (2017), PricewaterhouseCoopers LLP (“PwC 2017 Annual Survey”),
available at https://www.pwc.com/us/en/governance-insights-center/annual-corporate-directors-survey.html .
 PwC 2017 Annual
 See David Benoit & Vipal
Monga, “Are Activist Investors Helping or Undermining American Companies?,” The Wall Street Journal (Oct.
5, 2015), available at
https://www.wsj.com/articles/activist-investors-helping-or-hindering-1444067712 ; Huw Van Steenis, “In praise of activist
investors,” Financial Times
(Jun. 26, 2017), available at
 See PwC 2017 Annual Survey.
 See, e.g., David A. Katz &
Laura A. McIntosh, “Corporate Governance Update: Preparing for and Responding
to Shareholder Activism in 2017,” Harvard Law School Forum on Corporate
Governance and Financial Regulation (Mar. 24, 2017), available at https://corpgov.law.harvard.edu/2017/03/24/corporate-governance-update-preparing-for-and-responding-to-shareholder-activism-in-2017/ ; “Activist shareholders: How will you
respond?,” Deloitte (2015), available
at https://www2.deloitte.com/us/en/pages/finance/articles/cfo-insights-shareholder-investor-activism.html .
 See “ProxyPulse: 2017 Proxy
Season Review,” Broadridge Investor Communication Solutions, Inc. &
PricewaterhouseCoopers LLP (2017), available
at https://www.broadridge.com/_assets/pdf/broadridge-2017-proxy-season-review.pdf .
 See David Benoit & Kirsten
Grind, “Activist Investors’ Secret Ally: Big Mutual Funds,” The Wall Street Journal (Aug.
9, 2015), available at
https://www.wsj.com/articles/activist-investors-secret-ally-big-mutual-funds-1439173910 ; John Kell, “Here’s why activist investors
are winning so many fights,” Fortune
(Aug.10, 2015), available at
 See, e.g., Tim Loh & Jack
Kaskey, “DuPont Retail Investors Prove Decisive in Defeat of Trian,” Bloomberg (May 13, 2015), available at https://www.bloomberg.com/news/articles/2015-05-13/dupont-retail-investors-prove-decisive-in-defeat-of-trian .
 See John C. Bogle, “The Modern
Corporation and the Public Interest,” Speech Before the Public Company
Accounting Oversight Board (Dec. 7, 2017), available
at http://johncbogle.com/wordpress/wp-content/uploads/2017/12/PCAOB-12-7-17.pdf .
 See Joel Seligman, Equal Protection in Shareholder Voting
Rights: The One Common Share, One Vote Controversy, 54 Geo. Wash.
L. Rev. 687 (1985), available at
 For example,
Facebook’s founder, Mark Zuckerberg, owns less than 1% of Facebook’s equity
capital, but controls approximately 60% of its voting power. See Benjamin Robertson &
Andrea Tan, “Dual-Class Shares,” Bloomberg
(Dec. 15, 2017), available at
https://www.bloomberg.com/quicktake/dual-class-shares ; Facebook, Inc., Proxy Statement on
Schedule 14A dated April 14, 2017, available
 For example,
Viacom Inc. adopted a dual-class capital structure in 1990, where its
controlling shareholder, Sumner Redstone, controls the company while holding 8%
of its equity capital. See
Lucian A Bebchuk & Kobi Kastiel, The
Untenable Case for Perpetual Dual-Class Stock, 103 Va. L. Rev. 585
(2017) (“Bebchuk & Kastiel”), available
at http://www.virginialawreview.org/sites/virginialawreview.org/files/Bebchuk26%20Kastiel_Book.pdf .
 See Snap Inc., Prospectus dated
March 1, 2017, available at
 See Bebchuk & Kastiel;
“Discussion Draft Re: Dual Class and Other Entrenching Governance Structures in
Public Companies,” Investor as Owner Subcommittee, SEC Investor Advisory
Committee (Dec. 2017), available
 See, e.g., Facebook, Inc.,
Annual Report on Form 10-K for the fiscal year ended December 31, 2016, available at https://www.sec.gov/Archives/edgar/data/1326801/000132680117000007/fb-12312016x10k.htm
(stating “Mark Zuckerberg, our founder, Chairman, and CEO, is able to exercise
voting rights with respect to a majority of the voting power of our outstanding
capital stock and therefore has the ability to control the outcome of matters
submitted to our stockholders for approval, including the election of directors
and any merger, consolidation, or sale of all or substantially all of our
assets. . . . In addition, Mr. Zuckerberg has the ability to control the
management and major strategic investments of our company as a result of his
position as our CEO and his ability to control the election or replacement of
 See, e.g., “Dual-Class Stock,”
Council of Institutional Investors, available
at http://www.cii.org/dualclass_stock ; Madison Marriage, “State Street asks SEC
to block non-voting shares,” Financial
Times (Jun. 18, 2017), available
at https://www.ft.com/content/9595e5c4-51db-11e7-bfb8-997009366969 ; Chris Dieterich, Maureen Farrell &
Sarah Krouse, “Stock Indexes Push Back Against Dual-Class Listings,” The Wall Street Journal (Aug.
2, 2017), available at https://www.wsj.com/articles/stock-indexes-push-back-against-dual-class-listings-1501612170 .
 See, e.g., Aurelio Gurrea
Martínez, “Should securities regulators allow companies going public with dual
class shares?,” Oxford Business
Law Blog (Jan. 16, 2018), available
at https://www.law.ox.ac.uk/business-law-blog/blog/2018/01/should-securities-regulators-allow-companies-going-public-dual-class .
 See Georgina Lee, “Will the
introduction of dual-class shares in Hong Kong boost Chinese tech shares listed
in US?,” South China Morning Post
(Feb. 4, 2018), available at
https://www.bloomberg.com/news/articles/2017-12-15/hong-kong-moves-toward-dual-class-shares-wooing-next-alibaba (discussing Hong Kong Exchanges &
Clearing Ltd.’s decision to permit dual-class capital structures for companies
listed on its exchange).
 See, e.g., Matt Orsagh,
“Shareholder Engagement: Bridging the Divide Between Boards and Investors,” CFA
Institute Market Integrity Insights Blog (Mar. 26, 2014), available at https://blogs.cfainstitute.org/marketintegrity/2014/03/26/shareholder-engagement-bridging-the-divide-between-boards-and-investors/ .
 See, e.g., Steven Davidoff
Solomon, “A New Strategy for Shareholder Activism: Engagement,” The New York Times (Nov. 29,
2016), available at https://www.nytimes.com/2016/11/29/business/dealbook/a-new-strategy-for-shareholder-activism-engagement.html .
 See, e.g., Sherri McLoughlin,
“Using Technology for Better Shareholder Engagement,” Corporate Secretary (Nov.
10, 2017), available at
https://www.corporatesecretary.com/articles/technology-social-media/30940/using-technology-better-shareholder-engagement . While I am in favor of new applications
of technology, we must also be cognizant of how it affects those that are
unable to use the new technology.
 See, e.g., Shannon Greenwood,
Andrew Perrin & Maeve Duggan, “Social Media Update 2016,” Pew Research
Center (Nov. 11, 2016), available
at http://www.pewinternet.org/2016/11/11/social-media-update-2016/ .
 See, e.g., Kalev Leetaru, “How
Estonia's E-Voting System Could Be The Future,” Forbes (Jun. 7, 2017), available at https://www.forbes.com/sites/kalevleetaru/2017/06/07/how-estonias-e-voting-system-could-be-the-future/ (discussing Estonia’s e-voting system,
which has allowed online voting for national elections for more than a decade).
 See, e.g., Jeff John Roberts,
“Companies Can Put Shareholders on a Blockchain Starting Today,” Fortune (Aug. 1, 2017), available at http://fortune.com/2017/08/01/blockchain-shareholders-law/ .
 See, e.g., Regulation 14A [17
CFR 240.14a-1 – 17 CFR 240.14b-2].
 See Commissioner Kara M. Stein,
Statement on the Proposed Rule to Require the Use of Universal Proxies (Oct.
26, 2016), available at
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