One Share - One Vote: A European Rule?

Posted: 23 Apr 2007

See all articles by Guido Ferrarini

Guido Ferrarini

University of Genoa - Law Department and Centre for Law and Finance; European Corporate Governance Institute (ECGI)

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Abstract

In this paper, I tackle the question whether one share - one vote should become a European law rule. I examine, first of all, the economic theory concerning one share - one vote and its optimality, and the law and economics literature on dual class recapitalizations and other deviations from one share - one vote. I also consider the agency costs of deviations from one share - one vote and examine whether they justify regulation. I subsequently analyze the rules implementing the one share - one vote standard in the US and Europe. In particular, I analyze the self-regulatory rules of US exchanges, the relevant provisions of the European Takeover Directive (including the well known break-through rule), and the European Court of Justice's position as to golden shares (which also are deviations from the one share - one vote standard). I conclude that one share - one vote is not justified by economic efficiency, as also confirmed by comparative law. Also the European breakthrough rule, which ultimately strikes down all deviations from one share - one vote, does not appear to be well grounded. Only transparency rules appear to be justified at EU level as disclosure of ownership and voting structures serves a pricing and governance function, while harmonisation of the relevant rules reduces transaction costs in integrated markets.

Suggested Citation

Ferrarini, Guido, One Share - One Vote: A European Rule?. European Company and Financial Law Review, Vol. 3, No. 2, 2006. Available at SSRN: https://ssrn.com/abstract=981432

Guido Ferrarini (Contact Author)

University of Genoa - Law Department and Centre for Law and Finance ( email )

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16126 Genova, 16100
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HOME PAGE: http://www.clfge.org

European Corporate Governance Institute (ECGI)

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Belgium

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

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