Washington Law Review


Douglas R. Cole


Advances in electronic communications technology promise to invigorate shareholder voting as a viable tool for corporate governance, for example by decreasing the cost, and thereby increasing the frequency and effectiveness, of proxy fights. Increased use of shareholder voting, though, forces renewed focus on issues related to the shareholder voting process. One such issue is vote-buying. Traditionally, courts have treated vote-buying in the corporate context as per se illegal. More recently, however, courts have relaxed their attitude toward such transactions, a move generally applauded by commentators. This article argues that the newfound judicial acceptance of vote-buying is problematic, at least for publicly-held corporations. The article examines the reasons offered in support of vote-buying in such corporations, and suggests that the same benefits could be obtained, without the threat of harm presented by vote-buying, through the use of turnout payments to encourage shareholder participation in corporate voting contests. With regard to closely-held corporations, however, the article argues that vote-buying serves a useful preference aggregation function and generally should be permitted

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