Jason N. Ader and Eric Jackson write about proposed legislation that would significantly impair the rights of shareholders.
[T]wo Senate Democrats – Tammy Baldwin of Wisconsin and Jeff Merkley of Oregon – have introduced a bill that would restrict shareholder rights. The bill was co-sponsored by Senators Elizabeth Warren and Bernie Sanders. Would these same Democrats favor restricting voter rights to make it more difficult for voters to express their views? Then why restrict shareholder rights?
The bill seeks to shorten the number of days to two from 10 that shareholders have to disclose that they have bought more than 5 percent of a company, force shareholders to disclose derivatives and short positions they hold in a company, as well as redefine the rules about who has taken a 5 percent stake in a company to prevent “wolf pack” investing, which occurs when a lead fund tips off others that a disclosure is about to be made, giving them the opportunity to buy the same stock before the 10-day window is up.
The bill is misguided. Its backers are unwittingly supporting entrenched and underperforming managers to restrict shareholders from having the right to oust them.