ABSTRACT
This chapter addresses what is really the most fundamental, core, question in the book: is activism by shareholders rational? I wish (unsurprisingly) to answer this affirmatively. And to develop this positive assessment of shareholder activism, I need to move in two stages. The first stage seeks to show that shareholder activism is collectively beneficial: it is part of a good corporate governance system that generates greater collective benefits than the (collective) costs it creates. The second stage switches from the collective to the individual level of analysis. I wish to show the circumstances in which it is now, and could (with an appropriate regulatory framework) even more often be, in the individual interest of (at least many) individual institutional shareholders to engage in activism.
