Empowering Firm Owners by Separating Voting from Buying and Selling Shares

Abstract

This paper discusses a new system of firm governance. In the system, the responsibility for voting the shares of a firm (“voice”) is given to the people who ultimately provided the money, who, however, have to delegate it to proxy voting institutions. The system helps overcome collective action problems and conflicts of interest within firms, and it reduces the private benefits of control. The disadvantages for firm governance may be relatively modest. However, since the new system of voice is a conceptual innovation, the analysis of its effects is rather tentative. Further research and experimentations are required for firmer conclusions.