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Vanderbilt Law Review

Article Title

Corporate Voting

First Page

127

Abstract

What are we to make of shareholder voting? Delaware law presents voting as the ideological underpinning of a corporate governance system that gives directors wide control over other people's money. In the legal commentary, there are recurring descriptions of corporations as representative democracies in which New York Alumni Chancellor's Chair in Law & Professor of Management, Vanderbilt University.

.. Professor of Mathematics and Law, Vanderbilt University. We have benefited from the comments of Jeff Gordon, Sam Issacharoff, Curtis Milhaupt, Larry Ribstein, Lynn Stout, and participants at workshops at New York University, the University of Connecticut, and Emory University, colloquia at Columbia University, Fordham University, the University of Illinois, and the University of Iowa, and the Conference on Shareholder Roles, Shareholder Voting and Corporate Performance at the University of Cagliari. members act through their representatives, reinforcing a legitimacy role for corporate voting allied to political theory. Yet there is reason to wonder if corporate voting requires such a broad foundation. Voting plays a limited role in corporate decisionmaking, much more limited than in the public sphere. Shareholders have binding votes on only two things: the election of directors and ratifying fundamental corporate changes such as mergers. Even in those two areas, legislatures and courts have permitted substantial limits on the exercise of the shareholder franchise. Shareholders seldom seem to care much about the vote even when they have it, usually preferring the "Wall Street rule" (i.e., sell) when they disagree with a decision made by the corporation's managers.

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