The False Promise of One Share, One Vote

86 Pages Posted: 10 Mar 2008

See all articles by Grant M. Hayden

Grant M. Hayden

Southern Methodist University - Dedman School of Law

Matthew T. Bodie

Saint Louis University School of Law

Date Written: March 4, 2008


Shareholder democracy has blossomed. The once moribund shareholder franchise is now critical in takeover contests, merger decisions, and board oversight. However, the mechanisms of this vote remain largely undertheorized. In this Article, we use voting rights and social choice theory to develop a new approach to the corporate franchise. Political democracies typically tie the right to vote to the level of a person's interest in the outcome of the election. Corporate democracies, on the other hand, tend to define the requisite institutional interest quite narrowly, and thus restrict the right to vote to shareholders alone. This restriction has found its justification in the assumption that shareholders have a homogeneous interest in corporate wealth maximization. Such homogeneity, it is argued, maximizes efficient preference satisfaction.

This assumption of shareholder homogeneity is false. It is becoming increasing clear, for example, that shareholders have many different types of interests in a corporation. In addition, stakeholders such as employees, consumers, and creditors also have interests in corporate governance that are not currently captured through existing contractual regimes. Moreover, many of the conclusions drawn from the assumption of shareholder homogeneity are either based on dated understandings of Arrow's Theorem or, in some cases, are flat out inconsistent with the standard economic theory that they purport to embody. As a result, corporate voting schemes are sterile reflections of their more robust political counterparts. The Article argues that corporate law scholars should acknowledge the weaknesses of shareholder voting theory and should examine new ways of translating the preferences of corporate participants into a governance structure.

Keywords: shareholder, vote, merger, democracy, corporate

JEL Classification: G3, M5, R5

Suggested Citation

Hayden, Grant M. and Bodie, Matthew T., The False Promise of One Share, One Vote (March 4, 2008). Hofstra Univ. Legal Studies Research Paper No. 08-01 , Cardozo Law Review, Vol. 30, 2008, Available at SSRN: or

Grant M. Hayden (Contact Author)

Southern Methodist University - Dedman School of Law ( email )

P.O. Box 750116
Dallas, TX 75275
United States

Matthew T. Bodie

Saint Louis University School of Law ( email )

100 N. Tucker Blvd.
St. Louis, MO 63101
United States

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