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2004 Wis. L. Rev. 1425 (2004)
Shareholder Voting and the Bundling Problem in Corporate Law

handle is hein.journals/wlr2004 and id is 1439 raw text is: SHAREHOLDER VOTING AND THE BUNDLING PROBLEM IN CORPORATE LAW K.A.D. CAMARA* Introduction ................................................................... 1426 I. The D ebate .............................................................. 1429 A. Control Mechanisms and the Classical View ................ 1430 1. Fiduciary Duties ............................................ 1435 2. Independent Directors ..................................... 1437 3. Product, Executive-Labor, and Capital Markets ...... 1438 4. Market for Corporate Control ............................ 1441 5. Executive Compensation .................................. 1443 6. Social Norms ............................................... 1444 B. Shareholder Voting: A Simple Model ........................ 1447 C. The Bundling View .............................................. 1450 II. Rational Signaling and the Illusory Nature of the Bundling Problem ...................................................... 1454 A. An Intuitive Analysis ............................................ 1455 B. The Rational-Signaling Model ................................. 1463 III. Understanding the Ineffectiveness of Shareholder Voting ....... 1472 A. Decision Costs and the Inadequate Incentive to Investigate 1472 B. External Diseconomies of Incorrect Voting .................. 1474 C. External Economies of Correct Voting: A Free-Rider Problem ........................................... 1475 D. Campaign Costs and Corporate Governance ................. 1476 E. Bounded Rationality ............................................. 1478 F. Consistency v. Fidelity .......................................... 1480 G. Fiduciary Obligations ............................................ 1483 * Law Clerk to the Honorable Harris L Hartz, U.S. Court of Appeals for the Tenth Circuit. E-mail: camara@post.harvard.edu. I thank Lucian Bebchuk and Victor Brudney for sparking my interest in this subject; Timur Akazhanov, Lucian Bebchuk, Martin Gelter, Jeffrey Gordon, Robert Jackson, Reinier Kraakman, Ramona Lampley, Lynn Mostoller, J.J. Prescott, Steven Shavell, B.J. Trach, Benjamin Vetter, and participants in seminars at Columbia Law School, Harvard College, and Harvard Law School for helpful comments and conversations; and the John M. Olin Center for Law, Economics, and Business, and the Berkman Center for Internet and Society for f'mancial support. Most of this Article was written while I was John M. Olin Fellow in Law and Economics in Harvard Law School; part was written during a summer visit as Professor (Adjunct) of Law in the Department of Political Science at Hawaii Pacific University. The editors of the Wisconsin Law Review, in particular Laura Schulteis, Laura Dickman, and Nathan Kipp, did a wonderful job. All remaining errors are my own.

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