Working Paper No. 08-18:
The High Costs of Shareholder Participation


Harry Hutchison, R. Sean Alley

Date Posted: March 2008

Abstract (below)
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A number of observers contend that the new literature on happiness, the product of the work of psychologists and economists, poses a significant challenge to traditional economics.  Economics generally assumes that peoples’ choices advance their well-being. By contrast, current happiness literature suggests that people often make poor choices that undermine their subjective well-being. Therefore, more wealth and income are not sufficient to make people better off. In view of the new happiness literature, corporate law scholar James McConvill argues that shareholder empowerment should be seen as an end in itself because it enhances the empowered shareholder’s access to happiness-inducing participation. His recent article supplies a novel approach to analyzing corporate governance. Participatory experience is substituted for utility maximization as the relevant investor objective. McConvill disputes prevailing conceptions of rational choice analysis for shareholders and argues that the perceived logic which encapsulates rational choice theory fails to appreciate the non-financial benefits (shareholder happiness) that can be derived from increasing shareholder power. McConvill’s fresh look requires an explanation and a critique. This brief article is the second of a series of articles that offer critical analysis vitiating McConvill’s Panglossian conclusions.