The Evolution of Shareholder Voting Rights: Separation of Ownership and Consumption” (February 15, 2013), available at http://ssrn.com/abstract=2219865

The nineteenth century saw the standardization and rapid spread of the modern business corporation around the world. Yet those early corporations differed from their contemporary counterparts in important ways. Most obviously, they commonly deviated from the one-share-one-vote rule that is customary today, instead adopting regressive voting schemes that favored small over large shareholders. In recent years, both legal scholars and economists have sought to explain these schemes as a rough form of investor protection, shielding small shareholders from exploitation by controlling shareholders in an era when investor protection law was weak. We argue, in contrast, that regressive voting rules generally served not to protect shareholders as investors, but to protect them as consumers. The firms adopting such rules were commonly local monopolies that provided vital infrastructural services such as transportation, banking, and insurance. The local merchants, farmers, and landholders who used these services were the firms ’ principal shareholders. They commonly purchased shares not in the expectation of profit, but to finance collective goods