Chapter

The Structure of Voting Rights in a Public Company

Oliver Hart

in Firms, Contracts, and Financial Structure

Published in print October 1995 | ISBN: 9780198288817
Published online November 2003 | e-ISBN: 9780191596353 | DOI: http://dx.doi.org/10.1093/0198288816.003.0009

Series: Clarendon Lectures in Economics

 The Structure of Voting Rights in a Public Company

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In a public company, ownership is dispersed among small shareholders, causing a separation between ownership and control. This chapter discusses the role of takeovers and voting rights in limiting the ability of a management team to pursue its own goals rather than maximizing the company's public value. Using a general model of the effects of security‐voting structure on control transactions, it is shown that, under a reasonable set of assumptions, the optimal structure is a single class of shares with votes attached (‘one share‐one vote’). The author also discusses situations in which departures from ‘one share‐one vote’ may be optimal and relates the results to the empirical evidence.

Keywords: control transactions; corporate governance; ownership; security‐voting structure; shareholder rights; shares; takeover; voting rights

Chapter.  10275 words.  Illustrated.

Subjects: Financial Markets

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