“If we want things to stay as they are, things will have to change.” This maxim from Giuseppe Tomasi di Lampedusa’s classic novel, The Leopard, captures the central insight of our new article. In the novel, a Sicilian aristocrat watches revolutions transform his society’s formal arrangements while leaving its power structure intact. In our article, we argue that American corporate governance operates according to that logic: Elites adapt to evolving governance models, capturing participatory mechanisms while preserving democratic appearances. We call this the “Leopard Paradigm.”

The definition of “elites” is critical to the understanding of the paradigm.  We define them by their practical capacity to influence corporate decisions regardless of their formal role: institutional investors commanding trillions in assets; influential activist hedge funds; corporate insiders who control resources and possess informational advantages; controlling shareholders and ultra-wealthy individuals who can afford proxy solicitors and securities lawyers; and professional intermediaries such as proxy advisory firms and governance consultants. These actors work together to preserve their collective interest and exclude those who might disrupt existing arrangements.

In 2025, for example, the Business Roundtable launched a campaign to eliminate environmental, social, and political shareholder proposals. SEC Chair Paul Atkins declared “de-politiciz[ing] shareholder meetings” a top priority. The SEC withdrew from its gatekeeping function under Rule 14a-8. Texas enacted a $1 million ownership threshold and a 67% solicitation requirement for submitting shareholder proposals. And President Trump issued an executive ordercalling on the SEC to repeal or amend Rule 14a-8. These are not aberrations; they are corporate disenfranchisement by design.

Our article fills a significant gap in corporate governance literature. The debate over whether shareholder primacy or director primacy should prevail assumes that formal governance structures determine who wields influence. They do not. Whether the prevailing model entrenches management or empowers institutional investors, everyday shareholders remain disenfranchised. The Leopard Paradigm identifies what we term the “rights-powers gap” – the systematic divergence between formal participatory rights and the practical ability to exercise them meaningfully. Drawing on Wesley Hohfeld’s jurisprudential taxonomy,[1] Amartya Sen’s capability approach,[2] and Robert Michels’s iron law of oligarchy,[3] we demonstrate that when institutions grant formal rights without the capability to exercise those rights, they create not democracy but its simulation.

Elite status is, of course, not fixed, and actors and institutions may evolve to achieve it. Consider the Big Three institutional investors – BlackRock, Vanguard, and State Street. They began as passive index fund managers, vehicles for ordinary investors seeking low-cost participation in the markets. Over time, the sheer accumulation of assets under management transformed them into the most powerful shareholders in Corporate America, wielding governance influence that no individual investor could match. They became part of the elite structure – and when they briefly deviated from management preferences on certain environmental and social matters, other elite actors swiftly disciplined them into returning through coordinated state attorney-general actions, pension fund withdrawals, and congressional hearings.

A hedge fund that starts as a scrappy upstart can undergo a similar transformation. Even regulatory bodies can transition from protectors of ordinary participants to instruments of the elite, as the SEC’s trajectory on Rule 14a-8 demonstrates. The Leopard Paradigm does not merely predict that elites will capture governance structures; it predicts that the identity of elites will shift as actors acquire practical capacity to influence outcomes. The framework of mutual advantage among those with power remains undisturbed.

Consider the ancient ekklesia. In Athenian direct democracy, all male citizens formally enjoyed equal rights to participate in society, including isegoria – the right to speak. The ekklesia met as frequently as 40 times per year, with sessions lasting up to 12 hours. The formal architecture was revolutionary. Yet only 40,000 of Athens’s approximately 100,000 citizens were eligible to participate, quorum required only 6,000, and those who attended regularly were disproportionately wealthy, leisured, and urban. Even among those present, rhetoric – formal training available primarily to aristocratic families – determined who actually spoke. Modern counterparts to the Sophists, who trained Athenian aristocrats, are the governance professionals serving institutional clients. The pattern of  fictional equity is repeated in corporate governance, where the median American family holds just $15,000 in directly owned stock.

Perhaps most instructive is the position in Athens of the metics – freeborn foreigners who bore substantial obligations, including taxes and military service, yet were excluded from all political participation. The metics anticipate a recurring dynamic in corporate governance: Employees provide labor, consumers provide revenue, and communities provide the social license enabling corporations to operate – yet corporate law grants these constituencies no formal governance rights. They are the metics of the modern corporation

Our article traces the full historical arc of shareholder voice, from the East India Company’s General Courts, where shareholders met 13 to 22 times per year exercising real authority, through antebellum American corporations, where shareholders approved even routine operational decisions. As corporations grew massively in size and their ownership became widely dispersed after the Civil War, these hands-on models of shareholder participation became impractical, and Rule 14a-8 emerged as a procedural substitute for conditions that no longer existed. Shareholder proposals, we argue, are corporate governance’s “canary in the coal mine” – early warning signals of risks that might otherwise go unnoticed. The progressive erosion of Rule 14a-8, from its elegant simplicity in 1942 to the byzantine 2020 amendments passed over 13,000 opposing comment letters, traces the Leopard Paradigm’s path with remarkable fidelity.

Elite capture also operates by shaping which voices are amplified. ExxonMobil’s retail voting program—approved by the SEC in 2025—illustrates this dynamic. The program allows retail shareholders to opt into a standing instruction directing ExxonMobil to vote their shares in accordance with board recommendations indefinitely. On its face, this looks like democratization: more shareholders voting, more voices heard. But the program was designed in direct response to investment firm Engine No. 1’s successful 2021 proxy contest, and its strategic logic runs in the opposite direction. By capturing the roughly 75% of retail shares that go unvoted and locking them into perpetual management support, the program creates a structural counterweight to institutional activism. Expanding the franchise can itself be a tool of disenfranchisement when the expansion favors those who vote the right way.

Texas’ new shareholder proposal system exemplifies this escalation. A statute requires shareholders to hold at least the lesser of $1 million or 3% of corporate securities and to solicit holders of 67% of voting power before a proposal can reach the ballot – a 500-fold increase over Rule 14a-8’s $2,000 threshold. It is not a procedural filter but a price of admission that ordinary investors cannot pay.

The article concludes by demonstrating how the Leopard Paradigm exposes the conceptual weaknesses of shareholder primacy, director primacy, and team production theory.[4] Each assumes formal institutional design determines actual power distribution. Each treats constituencies as internally undifferentiated. The Leopard Paradigm asks the question these models avoid: which shareholders? which directors? And it predicts the answer will be the same regardless of formal allocation: whichever actors already possess the practical capacity to exercise formal rights will prevail.

ENDNOTES

[1] Wesley Newcomb Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning, 26 Yale L.J. 710, 717 (1917). Under Hohfeld’s taxonomy, shareholders have rights such as the right to vote, to sue, and to make proposals.

[2] Amartya Sen, Development as Freedom 74-76 (1999). Sen’s capability approach asks not whether people hold formal rights, but whether they can actually turn those rights into outcomes they value.

[3] Robert Michels, Political Parties: A Sociological Study of The Oligarchical Tendencies of Modern Democracy (Eden Paul & Cedar Paul trans., Free Press 1962) (1911). Michels showed that every organization, even those dedicated to democracy, inevitably concentrates power in the hands of a few.

[4] Margaret M. Blair & Lynn A. Stout, A Team Production Theory of Corporate Law, 85 VA. L. Rev. 247 (1999).

Sergio Alberto Gramitto Ricci is an associate professor of law at Hofstra University’s Maurice A. Deane School of Law and co-founder, president, and board director of the Center for Retail Investors & Corporate Inclusion. Christina M. Sautter is associate dean for research and professor of law at Southern Methodist University (SMU)’s Dedman School of Law and co-founder, secretary, and board director of the Center for Retail Investors & Corporate Inclusion. This post is based on their new paper, “Corporate Disenfranchisement,” available here.