ABSTRACT
This chapter aims to provide a comprehensive theoretical framework for the implications of contemporary shareholder activism on the traditional director primacy theory and the form of United States company law. The competing shareholder primacy theory de-emphasises authority in favour of accountability and attributes greater power to shareholders to address agency cost problems. Contemporary shareholder activism serves two important functions in corporate governance: monitoring function and the provision of new information and perspective to the boardroom. The present analysis finds that shareholder activism is compatible with a softer version of director primacy theory. Shareholder rights and the exercise of shareholder rights are regulated at the state and federal levels. The value and function of shareholder-adopted by-laws are, however, poorly understood by the courts. The law should provide enough room for shareholders to adopt by-laws to limit inefficient structures of corporate governance and to modify internal governance rules.
