Why Shareholders’ Agreements are Not Used in U.S. Listed Corporations: A Conundrum in Search of an Explanation

This short essay, prepared as the text of a talk for a conference on shareholders’ agreements, examines what I consider one of the most puzzling and overlooked issues of US corporate law and securities regulation. The issue is why agreements among shareholders are not often used as control enhancing devices among American listed corporations. I offer a few ideas on this question, not providing a conclusive answer, but rather exploring some hypothesis and suggestions for further research. In order to do that, I divide my discussion in two parts. First, I quickly overview the substantive regulation of shareholders’ agreements in the United States, focusing in particular on Delaware law and on the Model Business Corporation Act. Second, I concentrate on the issue of the use – or, better, limited use – of shareholders’ agreements in listed corporations. I offer some new possible explanations for the limited use of these type of covenants in the United States.