from the one-share-one-vote rule that subsequently became the norm.
one-share-one-vote rule. (48) The Revisors showed concern that
voting by proxy and providing for a one-share-one-vote rule in
ownership, the Mohawk adopted a one-share-one-vote rule from the outset?
voting, while 63% followed a one-share-one-vote rule. (110) Our
In these scenarios, the firm's issuance of multiple classes of shares will be dominated by the one-share-one-vote rule in that inferior management teams will not be appointed to run single-voting-class firms.
Under what circumstances might issuance of dual-classes of shares not be dominated by the one-share-one-vote rule? Furthermore, how would the optimality of the one-share-one-vote rule be affected if shareholders of different classes were able to write binding contracts with respect to managerial compensation and golden parachute packages?
Table 1 summarizes results of the One-Share-One-Vote rule. The incumbent will retain control if [y.sub.I] + [z.sub.I] [greater than] [y.sub.R] + [z.sub.R] (Scenarios 1 to 3) since the rival will not be able to outbid incumbent management for control, and total firm value will be:
Thus, the value of the firm under the One-Share-One-Vote rule equals:
The One-Share-One-Vote rule leads to employment of the most efficient management team; that is, total asset value is maximized under the management team selected under the One- Share-One-Vote rule.