One Share – One Vote: A European Rule?

Ferrarini Guido
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Ferrarini Guido: Professor of Business Law and Capital Markets Law, University of Genoa – Faculty of Law; Vice-Chairman, European Corporate Governance Institute, Brussels.

European Company and Financial Law Review, 2006, vol. 3, issue 2, 147-177

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.

Date: 2006
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DOI: 10.1515/ECFR.2006.007

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