Law Commons^™

Ties That Bond: Duel Class Common Stock And The Problem Of Shareholder Choice, Jeffrey N. Gordon

Faculty Scholarship

Professor Gordon argues that the Securities and Exchange Commission (SEC) should adopt a rule enabling the New York Stock Exchange (NYSE) to maintain its traditional rule forbidding NYSE firms from recapitalizing with dual class common stock After critically evaluating the purported justifications for dual class recapitalizations, Professor Gordon presents empirical data to demonstrate that such recapitalizations may have a negative impact on shareholder wealth. He then describes the collective action and strategic choice problems in shareholder voting that allow managers to win approval for such wealth-reducing recapitalizations. The traditional NYSE rule is a means by which shareholders and managers have …