Advanced Search
MyIDEAS: Login to save this paper or follow this series

One share-One vote, le nouveau Saint Graal

Contents:

Author Info

Registered author(s):

    Abstract

    More than one third of companies listed in the FTSE EUROFIRST 300 index are governed accordingly to principles differing from the One share – One vote standards. These exceptions could be illustrated by several practices such as Scandinavian multiple voting shares, non voting shares as seen in some State members as authorised by European Directives, French double voting shares, “golden shares” concerning recently privatized firms, or even preference shares as observed in Holland. Such variety can be explained by the fact that “control rights” and “cash-flow rights”, understood as essential to the company's activities, are distinctly considered in the shareholder practices. The question at stake is to know if the application of the One share – One vote as a European standard would be justified with regard to European Law, including its underlying principles, and to economic efficiency in general. Indeed, One share – One vote enthusiast affirm that this rule participates to corporate democracy and contributes to increases firms' performance. The aim of our study is to determine whether these principles are reached or not. As a preliminary remark, we can notice that the European Commission intervention is questionable. First, its competence, and therefore the legality of a potential action, is not obvious. Indeed, owing to the subsidiarity principle and the article 48.2: (“co-ordinating to the necessary extent the safeguards which, for the protection of the interests of members and others, are required by Member States of companies or firms, with a view to making such safeguards equivalent throughout the Community”.) and the European Parliament position concerning the Takeover Directive, the legitimacy of the European Commission in this case is undoubtedly compromised. Then, the application of One share - One vote, by the cancellation of certain rights attached to a share, would violate a democratic principle, founder of the European Union, and dedicated by Member States Constitutions, known as private property. It would have, as a result, an unjustified, not compensable and therefore, illegal expropriation. We also have to question ourselves concerning the concept of corporate democracy and its consequences on Europeans companies. Unquestionable at first glance, is the notion of democracy transposable it in corporate Law? Is it only referring to a strict equality between shareholders or rather intents to limit unequal situations and therefore, prevent dominant shareholders from unilaterally capturing the company's performance? The respect of principles such as equity, shareholders general interest and company's interest, combined with transparency rules and protection of minority shareholders leads us to favour the second supposition. Finally, we underline that the ultimate argument relating to efficiency as a result from the strict application of the One share – One vote rule, is tempered by economical studies and by the practice observed in several State members. The One share - One vote rule could definitely be necessary for market readability purposes. But, some exception to this rule might be justified with regard to the company's interest. Therefore, some flexibility principles should remain. A dogmatic approach focused on shareholders, or certain type of shareholders, would disadvantage the development of the internal market and could not be justifiable on a legal ground. We believe that promoting corporate democracy requests an enhancement of transparency with a better bordering of existing practices and a strengthening of minority shareholders (by improving an “upper standard” harmonization).

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.essec.fr/faculty/showDeclFileRes.do?declId=7053&key=__workpaper__
    Download Restriction: no

    Bibliographic Info

    Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 06019.

    as in new window
    Length: 18 pages
    Date of creation: Dec 2006
    Date of revision:
    Handle: RePEc:ebg:essewp:dr-06019

    Contact details of provider:
    Postal: ESSEC Research Center, BP 105, 95021 Cergy, France
    Email:
    Web page: http://www.essec.edu/
    More information through EDIRC

    Related research

    Keywords: Corporate Governance; One share-One vote; Shareholder Democracy;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ebg:essewp:dr-06019. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sophie Magnanou).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.