One Share - One Vote: The Theory

Review of Finance, Forthcoming

Posted: 11 Mar 2008

See all articles by Mike Burkart

Mike Burkart

Swedish House of Finance; London School of Economics and Political Science, Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Samuel Lee

Santa Clara University - Leavey School of Business; European Corporate Governance Institute (ECGI); Swedish House of Finance

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Abstract

The theoretical literature on security-voting structure can be organized around three questions: What impact do non-voting shares have on takeover outcomes? How does disproportional voting power affect the incentives of blockholders? What are the repercussions of mandating one share - one vote for firms' financing and ownership choices? Overall, the costs and benefits of separating cash flow and votes reflect the fundamental governance trade-off between disempowering blockholders and empowering managers. It is therefore an open question whether mandating one share - one vote would improve the quality of corporate governance, notably in systems that so far relied on active owners.

Keywords: Security-Voting Structure, Market for Corporate Control, Controlling Minority Shareholders

JEL Classification: G32

Suggested Citation

Burkart, Mike C. and Lee, Samuel, One Share - One Vote: The Theory. Review of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1103995

Mike C. Burkart (Contact Author)

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

London School of Economics and Political Science, Department of Finance ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

HOME PAGE: http://www.cepr.org/default_static.htm

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Samuel Lee

Santa Clara University - Leavey School of Business

500 El Camino Real
Santa Clara, CA California 95053
United States

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

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