UCLA School of Law

Shareholders can influence the governance of a corporation by exercising their rights to vote, sue, and sell. Corporate law scholars have pointed to the right of sell as a reason to avoid mandatory corporate law rules. Shareholders can address governance abuses by exiting their investment. This essay considers some of the limitations to the right to sell. First, it may not be possible for a shareholder to sell in time to avoid substantial losses. Second, corporate governance irregularities may not be material enough induce investors to sell. Federal corporate law can address some of the limits to the effectiveness of the right to sell.