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Voting and Power in the Small Firm: Alternatives to the One-Share, One-Vote Rule

Author

Listed:
  • Robert Goon

    (Long Island University)

  • John L. Teall

    (Pace University)

Abstract

The one-share, one-vote rule applicable to the governance of most business firms provides for proportional voting power which differs substantially from proportional shareholdings of investors. This problem is particularly acute in small firms where several (or many) shareholders may hold significant proportions of shares. This paper reviews well-known game theoretic algorithms (weighting or vote assignment schemes) for the alignment of power with proportional shareholdings. It also provides a simple measure of the “misalignment of power from proportional shareholdings” and discusses its application in determining more equitable vote reassignment schemes.

Suggested Citation

  • Robert Goon & John L. Teall, 1994. "Voting and Power in the Small Firm: Alternatives to the One-Share, One-Vote Rule," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 3(2), pages 127-139, Spring.
  • Handle: RePEc:pep:journl:v:3:y:1994:i:2:p:127-139
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    More about this item

    Keywords

    Voting; Governance; One-Share One-Vote; Cumulative Voting; Small Firm; Small Business;

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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