Democratising Corporate Governance: How to implement shareholder assemblies

For over half a century, the doctrine of shareholder primacy has offered a simple moral compass for corporate executives: make as much money as possible. Popularised by Milton Friedman in his seminal 1970 New York Times article, the theory posits that by maximising profits within the bounds of law and custom, companies maximise social welfare. If shareholders wish to save the whales or support the arts, Friedman argued, they should do so with their own dividends, not the company's ledger. But does this division of labour still hold in a world of complex externalities? And in an era where voting power is increasingly concentrated in the hands of a few giant asset managers, whose preferences are being served? In a recent discussion at London Business School, chaired by Professor Sergei Guriev, Dean of the School, three leading academics, Sir Oliver Hart, Hélène Landemore, and Luigi Zingales, presented a novel solution. Their proposal, detailed in a working paper by the three of them and a forthcoming book by Oliver and Luigi, Citizen Investors, challenges the conventional wisdom of corporate governance. They argue for the introduction of Investor Assemblies, deliberative bodies of randomly selected shareholders, to bridge the widening gap between what investors want and what companies do. The event was part of the Wheeler Institute Rethinking Capitalism series. Subscribe to our YouTube channel ➤ https://bit.ly/3bukgoT Visit our website ➤ https://bit.ly/3cl5b8m Follow our social media accounts: Twitter: https://bit.ly/3gGs1Kg LinkedIn: https://bit.ly/2TyBfQY Instagram: https://bit.ly/3cLK54D [00:00:00] Theoretical Foundations of Shareholder Welfare Sir Oliver Hart initiates the session by challenging the notion that corporations must prioritise profit above all else. He argues that companies should instead maximise shareholder welfare, given that investors are individuals with distinct moral values. Insights are shared regarding how companies often possess a comparative advantage in addressing social issues, such as environmental pollution, when compared to individual charitable actions. [00:13:53] The Problem of Concentrated Institutional Power Luigi Zingales addresses the logistical failures of modern corporate governance and the problematic concentration of voting power. He highlights how a small number of institutional managers now control the vast majority of market votes, a situation he compares to a "politburo" style of decision-making. Discussion turns to why individual investors remain apathetic and how current pass-through voting choices frequently fail to reflect genuine public preferences. [00:26:07] Practical Solutions through Investor Assemblies Hélène Landemore introduces the concept of using sortition, or random selection, to form representative investor assemblies. Drawing upon her experience with France's Citizens' Convention on Climate, she explains how these deliberative bodies can bypass traditional political capture and professional lobbying. Insights are shared regarding the mechanics of participant selection and the transformative effect that informed deliberation has on the creation of a legitimate collective will. [00:41:23] Critiques and the Role of the State The panel engages with the audience to address questions concerning the feasibility of the proposal. Discussion covers the potential for corporate lobbying to subvert government regulations, alongside the philosophical debate over whether aggregating shareholder preferences truly leads to social justice. The speakers examine the tension between market-based incentives and the necessity of maintaining strong legal frameworks to protect the common good. [00:56:30] Implementation Realities and Final Reflections Final reflections focus on the costs, scalability, and efficiency of operating democratic assemblies within the financial sector. The panel evaluates the potential transition of these assemblies from advisory roles to entities possessing mandatory rule-making authority. Discussion concludes with reflections on the academic achievements of the participants and the future of democratised corporate governance.

Added 29 Aug 2026