Unequal Treatment and Shareholders' Welfare Growth: 'Fairness' v. 'Precise Equality'

Abstract

This paper argues that a strong or rather mechanical equal treatment rule in share repurchases, distributions in kind or capital reductions is not efficient. An economic analysis of the law shows that disparate treatments of shareholders may increase shareholders' welfare. Disparate treatment, however, should not result in the oppression of minorities. Rather, oppression of minorities shall be prevented with the fairness standard. Fairness requires one to consider others' interests, but not to pursue others' interest to the detriment of one's own. Unfair is a disregard of the interests of the minorities which could be taken into consideration at no cost.

Keywords: Equal Treatment, Equal Opportunity, Share Repurchase, Distribution, Fairness

JEL Classification: K22