Thursday, December 3, 2020

New Paper: Corporate Governance and the Feminization of Capital

Sarah Haan recently posted a new detailed and meticulously documented draft article that we'll likely be talking about for years to come.  In it, she presents a forgotten history of an era when women came to outnumber men as the stockholders of public corporations.  At the time, many corporations disclosed the gender breakdowns for their stockholders.  Early on, the Wall Street Journal covered the rise of women as shareholders, revealing that more women than men held stock in American Express, Western Union, and Eastman Kodak as of 1916.  Women bought stock at a robust clip for years afterward as well and gained clear per capita majorities at many public companies.

Haan points out that women likely sought stock ownership and participation earnestly because it allowed them a much greater measure of equality than the labor market.  Each share received the same dividend, regardless of the owner's gender.  In contrast, the labor markets reduced (and continue to reduce) women's returns.

Women began to outnumber men as shareholders around the time Berle and Means shaped the course of corporate law and theory with their distinction between dispersed, uninformed, and passive shareholders and active management.  Haan explains that modern scholars have largely forgotten that this was a gendered distinction.  "Passive" women were shareholders while "active" men served as managers.  

As corporate law swallowed this distinction, it shaped corporate law's development.  Many corporate law rules now complicate shareholder participation and defer to market-based solutions over empowering shareholder perspectives.  (This is a subject Haan has explored in another article.). Some early corporate law scholars such as William W. Cook had first pushed for vigorous roles for shareholders in corporate governance.  Yet these theorists changed their minds about shareholder participation as women began to hold stock, vote, and affect corporate affairs. 

But the reality is far more complex.  These dispersed shareholders were somewhat active and did actively press for women to receive board seats at companies where women owned a majority of the stock.  Although they were, on occasion, successful when men needed to ally with them in fights for control, women failed to win equality in the boardroom with men continuing to dominate board positions.  This continues today, with the NASDAQ pushing its listed companies to have at least two board members who are not white, heterosexual men.

Early reaction to the draft has been significant and may shift how some present the early development of large public corporations.


After reading it, it seems inescapable that a great bulk of corporate scholarship has missed the gendered history and the gender politics behind the development of modern corporate law.  The paper also puts the rise of institutional shareholders into a different, gendered perspective.  The development had the effect of shifting voting power from dispersed women and concentrating it in the hands of a small number of predominantly male asset managers.  

As Haan explained, the article opens a door to more conversations "about gender, power, and the evolution of corporate law."

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