Early in the 20th century, many owners of the iconic companies of the day were women. Before the 1929 stock market crash, female shareholders outnumbered male shareholders at AT&T, General Electric and the Pennsylvania Railroad (even though the men owned more shares).
But men had little respect for women’s ability to exercise their rights as owners to discipline company management. “You might as well ask the clouds in the air to propel the railroad locomotives,” William Cook, a widely read legal scholar, wrote in 1914.
This combination — the feminization of capital and men’s disdain for it — has had repercussions right up to today, according to an important article this year in Stanford Law Review by Sarah Haan, a professor at Washington and Lee University School of Law.
The lack of faith in women’s capabilities as shareholders contributed to the de-emphasizing of shareholders’ role in running companies, Haan argues. Laws and regulations, many of them from the New Deal, came to rely instead on the stock market to discipline companies, she writes. “The idea being that shareholders should exit companies if they’re uncomfortable with how they’re run: Discipline will occur through stock prices,” she told me in an interview.
That’s still kind of the way things work, Haan said. Executives who are paid in shares and stock options have an incentive to make the stock price go up. Corporate governance law emphasizes disclosure so shareholders have the information they need to decide whether to stay or sell. One problem: Market-based discipline doesn’t work for shareholders if they care about things other than the share price, such as fighting climate change.Opinion | How Sexism Influenced Corporate Governance – The New York Times