Danielle A. Chaim (Bar-Ilan University – Faculty of Law) has posted Anticompetitive Corporate Governance on SSRN. Here is the abstract:
Corporate law and antitrust have long run on separate tracks. Corporate law looks inward, governing the allocation of authority within the firm. Antitrust looks outward, policing rivalry in the marketplace. This Article argues that the rise of large, diversified institutional investors has made that separation increasingly untenable. Since these investors hold substantial positions across broad swaths of the economy and wield economy-wide governance influence, corporate governance is no longer confined to the internal affairs of the firm. Instead, it can become an instrument of competitive harm.
The Article develops a two-level account of anticompetitive corporate governance. At the portfolio-company level, investor-driven governance standards may soften product- and labor-market competition by dulling firms’ incentive to compete aggressively when their rivals are owned by the same investors. At the investor level, coordinated governance campaigns may distort competition among institutional investors themselves. In primary capital markets, collective resistance to disfavored governance arrangements operates as a form of buyer-side coordination, increasing investors’ bargaining power over the companies raising capital. In secondary markets, collective adherence to common governance standards reduces the variation among portfolio companies, which diminishes the performance differences asset managers can exploit to distinguish themselves.
These dynamics expose a regulatory mismatch that produces a striking enforcement gap. Antitrust law formally reaches product- and labor-market harms, but governance-mediated harms often operate through diffuse channels of influence and are difficult to prove through conventional antitrust enforcement. In capital markets, by contrast, antitrust tools are better suited to address investor coordination, yet implied antitrust immunity often channels oversight to the SEC—an agency not institutionally designed to police competition as such.
To close this gap, the Article argues that antitrust and securities regulation must work in concert rather than as substitutes, each bringing its tools to bear across a boundary that has long kept them apart. Among the reforms it advances, the Article makes a timely case for pass-through voting as a structural check on the concentrated governance power of institutional investors.
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