Revisiting On The Principle Of One Share-One Vote

As an important principle in Company Law,one share-one vote also reflects the economic logic between the company’s right of control and residual claim right.According to company contract theory,the company’s voting rights should be allocated to the final claimants of remaining company property--shareholders of the company and at the same time in strict accordance with the principle that each residual claim has a correspond vote right,that is,one share one vote.Most scholars believe that the company has to abide by the united ownership structure of one share-one vote so as to avoid expensive agency cost.As an alternative for one share-one vote,dual class stock structure refers to that the company divides common shares into two types according to the voting right attached in each share:A shares follow the principle of one share-one vote,but B shares own multiple voting rights in each share.Dual class stock structure,though obviously deviating from the principle of one share-one vote,has drawn increasing popularity from companies with financing demands in such a globalized capital market of fiercely competition.The reason lies in that the adoption of an united ownership structure makes the founders’control over the company gradually weakened with capital inflows and may even finally lead to loss of control.However,if a dual class stock structure is adopted,the founders and managing groups can choose to collect funds from the capital market without worrying about their control over the company being diluted.When the dual class stock structure was first developed in America in the 1920s,New York Stock Exchange still adhered to the principle of one share-one vote and wouldn’t allow companies of double equity ownership structure to be listed there.In the middle of 1980s,driven by the intensified competition of exchange houses,New York Stock Exchange finally decided to give up the principle of one share-one vote after 60 years of adherence.Facing the dilemma of whether continuing to follow the one share-one vote principle or not,America finally chose to fully play the role of market discipline and allow companies of dual class stock structure to carry out IPO.Alibaba would have been prepared to do IPO in Hongkong,though its "Chinese partnership" system was not the same as dual class stock structure,it still violated the principle of one share-one vote.China chose to stick to the one share-one vote principle and rejected Ali’s application of being listed.Consequently,Ali had to complete IPO overseas in America.This event also triggered a heat discussion on the principle of one share-one vote.This thesis takes Alibaba’s IPO in America as an example and revisit on the principle of one share-one vote.Through the case,this thesis convey the dilemma that whether China should stick to or give up the principle of one share-one vote.The United States also experienced the predicament once but settled it by system design.This thesis introduces the development of dual class stock structure in America in detail and the correspond system design as solution,and then proposes that one should make hypothesis boldly while prove it conscientiously and carefully on the basis of successful experience of United States.In the end,this thesis suggests that China solve the dilemma of whether sticking to or giving up the principle of one share-one vote from the perspective of legislation,information disclosure system,independent director system,remedy system and voting right regulation,so as to enhance the competitiveness of China in the global capital market.This thesis consists of three chapters:introduction,the body and conclusion.The body chapter mainly includes five parts:The first part discusses Jack Ma’s"Chinese partnership" system,though it was not the same as dual class stock structure,they both violated the principle of one share-one vote.However,Hongkong chose to stick to the principle of one share-one vote and rejected Ali application for IPO.This part indicates the attitude of China towards double ownership structure by the real event of Ali IPO.The second part tries to prove the rationality of one share-one vote theoretically from the perspective of economics of law.However,under the increasingly fierce competition in the globalized capital market,one share-one vote leads enterprises into the predicament of "financing and equity dilution" and makes it difficult for more enterprises to meet the financial needs in capital market.This part revisits the principle of one share-one vote from the perspective of theory and reality and conveys the dilemma that China is facing in whether sticking to or giving up the principle of one share-one vote.The third part introduces the development of double ownership structure in America in detail.When facing the dilemma of whether sticking to or giving up the principle of one share-one vote during economic take-off period,America eventually decided to respect the choice of market and allowed the existence of double ownership structure.The fourth part makes a comprehensive analysis on the reason of America’s adoption of double ownership structure.The sound information disclosure system,independent director system,group litigation system offered a sturdy system support;academic debate between positive,opposite and eclectic scholars for double ownership structure offered a solid theory for further perfection.The fifth part focuses on the dilemma of whether China sticks to or gives up the principle of one share-one vote and proposes that China should make hypothesis boldly while proving it conscientiously and carefully on the basis of successful experience of United States.The author suggests that China solve the dilemma of whether sticking to or giving up the principle of one share-one vote from the perspective of legislation,information disclosure system,independent director system,remedy system and voting right regulation,so as to enhance the competitiveness of China in the global capital market.