Academic journal article Fordham Journal of Corporate & Financial Law

A Little Birdie Said: How Twitter Is Disrupting Shareholder Activism

Academic journal article Fordham Journal of Corporate & Financial Law

A Little Birdie Said: How Twitter Is Disrupting Shareholder Activism

Article excerpt


Shareholders are organizing and mobilizing on new social media platforms like Twitter. This changes the dynamics of shareholder proxy contests in ways that favor shareholders over management. Disruptive technology may bring about a shareholder revolution, which may not be in shareholders' best interests, at least from the perspective of shareholder wealth maximization, and it also has powerful implications for the future of corporate social responsibility.


Twitter offers a platform for global social interaction. Twitter users send "tweets," which are a sort of 140-character text message to the world. About 500 million tweets are sent every day.1 This social media platform can be a powerful force for enabling collective action in modem society.

This essay will focus on one type of collective action that many scholars have concluded simply does not work. Shareholder activism, which has long been plagued by collective action problems including rational apathy and free riding, could be rejuvenated by emerging social media tools like Twitter. Tweets are a cheap and easy way for shareholders to engage with each other and build consensus and support for collective action.

The notion that Twitter facilitates collective action is not new2 (although this paper's application of Twitter to shareholder activism is novel). Twitter and other forms of social media have been widely adopted by marketing firms and political campaigns as a means of coordinating otherwise disconnected individuals and groups. Perhaps most famously, scholars of the Arab Spring widely credit Twitter, along with Facebook, YouTube, and other social information networks, with galvanizing Arab Spring activism.3

The Arab Spring was a revolutionary movement that began in Tunisia on December 17, 2010 and erupted into large-scale protests across the Arab world by mid-2012.4 The result of these civil uprisings was the overthrow of authoritarian and totalitarian leaders in Tunisia, Egypt, Yemen and Libya.5 The root causes of these mass protests are complex and multifaceted. But many scholars agree that a major catalyst for the Arab Spring was the advent of social media, especially Twitter, and its role in driving awareness and collective action.6

I. The Revolution Will Not Be Televised

Many scholars have made analogies between corporations and nations.7 A corporation's charter is often referred to as a "private constitution."8 Shareholders have the right to elect the leaders of corporations, the board of directors, much as democratic citizens have the right to elect legislators. Those analogies are worth revisiting in an era where overly authoritarian nations risk being overthrown by the tweeting masses and their charismatic leaders.

It turns out that a lot of things can be said in 140 characters. For example, Carl Icahn, the famous activist investor, grabbed Wall Street and the tech world's attention when he tweeted caustically, "All would be swell at Dell if Michael and the board bid farewell."9 However, the SEC-mandated disclosure that is supposed to be included on all publicsecurities-related communications is not among them. 10 Another problem with using Twitter to communicate about securities matters is that it might violate Regulation Fair Disclosure.

As a purely legal matter, Twitter is limited in its ability to facilitate shareholder activism. Shareholder communication rules are more liberal than ever,11 but shareholder voting rules remain strictly limited by SEC rules and securities laws. Shareholders can and do use Twitter to communicate and become informed about important upcoming shareholder votes. For example, shareholders who would never rationally read a 300-page proxy statement might respond to a 140-character tweet. But if shareholders actually want to vote for a precatory proposal or against management, they still need to fill out a proxy card or attend the annual meeting to vote. …

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