Cardozo Law Review
Abstract
This Article answers, in the affirmative, two core research questions: do we need long-term shareholders and can we find them? The economy needs long-term shareholders to provide prudent and profitable patient capital, generate an antidote to corporate short-termism, and spearhead managerial accountability. Finding these shareholders requires a structure that provides the right environment and incentives for such investment. This Article presents a novel application of the trust fund theory - the dominant philosophical paradigm of American corporate finance in the nineteenth century - as a vehicle for stimulating long-term shareholding. The central features of the reformulated trust fund theory include the creation of relatively illiquid trust securities, a permanent fund financed by the sale of the securities, and long-term shareholders who, in exchange for less liquidity, receive an enhanced voice in corporate governance. Apart from addressing the need for long-term shareholding, the revised trust fund theory will also serve the additional functions of providing creditor protection and assuring regulatory compliance.
Disciplines
Law | Securities Law
Recommended Citation
Emeka Duruigbo,
Stimulating Long-Term Shareholding,
33
Cardozo L. Rev.
1733
(2012).
Available at:
https://larc.cardozo.yu.edu/clr/vol33/iss4/11