Helping the Little Guy: A Comparative Analysis of Shareholder Protection Mechanisms in the United States and Singapore

As American corporate law has developed since the Progressive and New Deal eras, shareholders have increasingly employed the shareholder proposal mechanism, provided by SEC Rule 14a-8, as a means to achieve any number of desired results. Generally, Rule 14a-8 requires companies to include shareholder proposals on their proxy statements. The desires of shareholders, outside of their often primary desire to make money, now frequently include Environmental, Social, and Governance (“ESG”) reform, increasing board diversity, merger and acquisition-related decisions, and monitoring executive pay. In particular, shareholders’ focus on ESG reform is no surprise given the broad worldwide focus on responding to rising environmental concerns. Indeed, according to the National Oceanic and Atmospheric Administration, an American scientific and regulatory agency, 2021 “culminated as the sixth warmest year on record for the globe.” Further, “the years 2013-2021 all rank among the ten warmest years on record.” Investors in both the United States and Europe have begun responding to these environmental issues. However, the capabilities American shareholders (particularly minority shareholders) have to effect positive environmental change at the corporate level is hindered by the fact that the United States ranks 36th in the world when it comes to protecting minority investors. A minority investor, or shareholder, is one who owns less than half of a given company’s total shares—thus making them in the minority of overall shareholders. While the United States ranks high (6th) on a general ease of doing business scale, its protection of minority investors, according to the World Bank, lags. The U.S. has a 71.6 (out of 100) score for the protection of minority investors. Particularly troublesome among the World Bank’s analyses of American protection of minority investors is the nation’s “[e]xtent of shareholder rights index.” This means, generally, that a minority investor interested in changing a company’s practices in an effort to improve said company’s environmental impact has less of an ability to do so in the United States than in 35 other nations. Why does the United States lag behind other nations with regard to minority shareholder protection, and how can it change for the better?