One share - one vote : a european rule?

  • 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.

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Author:Guido A. Ferrarini
Parent Title (German):Working paper series / Johann-Wolfgang-Goethe-Universität, Institute for Law and Finance ; 47
Series (Serial Number):Working paper / Johann-Wolfgang-Goethe-Universität, Institut for Law and Finance (47)
Publisher:Inst. for Law and Finance
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2006
Year of first Publication:2006
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2006/06/12
Tag:European Takeover Directive; break-through rule; corporate voting; golden shares; multiple-voting shares; non-voting shares; one share-one vote
JEL Classifications: G32, G38, K22
Institutes:Rechtswissenschaft / Rechtswissenschaft
Dewey Decimal Classification:3 Sozialwissenschaften / 34 Recht / 340 Recht
Licence (German):License LogoDeutsches Urheberrecht