The corporate governance role of retail investors


Retail investors seem to be turning into minor actors on the U.S. and European corporate governance scene. Nevertheless, the issue of activating retail votes is becoming increasingly supported in the U.S., where a growing body of scholarship emphasizes the need to re-engage retail investors and explores a variety of possible means for retrieving the lost shareholders. Against this backdrop, this Article shows why supporting retail voting in the European and U.S. corporate landscape is not trivial. It then analyzes the potential constraints on retail shareholder engagement in the voting process posed by the current European regulatory framework and comparatively assesses whether, and if so how, the U.S. proposals for activating passive retail investor votes can provide a blueprint for a similar pattern in Europe. To encourage retail votes, minimizing cognitive costs of informed voting as well as psychological limitations associated with decision-making is necessary. Hence, this Article argues that helping retail shareholders overcome decision-making costs by widening the scope of the tools available in order to allow them tag along with more expert third parties—whether institutional investors, the controlling shareholders or the board of directors—to direct their voting decisions might usefully broaden the reach of the existing regulation in terms of its potential to increase shareholder participation.