Protecting Minority Stockholder Rights: On a Conflict of Interest at Revlon

The principle of majority rule is a staple of democratic theory. Typically the victor of a close election is quick to proclaim that “the people” have spoken. That “the people” corresponds to 51% of those who voted is beside the point. What about the 49% who voted against the victor? What about the minority’s rights? In the U.S. Senate, the fact that it takes 60 out of 100 votes to end a filibuster means that a large minority can halt a majority’s bill. In the European Council, the qualified majority rule means that for a bill to pass, the states in the majority must be at least 55% of the total number of states and must have at least 55% of the E.U.’s population between them.  A large minority can therefore stop a small majority. In both of these “intergovernmental” bodies, the implication is that 51% of a vote is not as significant as the principle of majority rule suggests. What about the rights of a minority of shares of stock in corporate governance? When a majority stockholder has control of management, the interests of the minority stockholders can be shirked. This is particularly true when a majority stockholder proposes a going-private transaction with the aid of management.

The full essay is at "Protecting Minority Stockholders."

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1. Peter Lattman, “To Perelman’s Failed Revlon Deal, Add Rebuke From S.E.C.,” The New York Times, June 14, 2013.

2. Ibid.

3. Ibid.

4. Ibid.

5. Ibid.

6. Ibid.

Keeping the Palestinian Authority Down at the United Nations

In “defiance of retaliation threatened” by the United States and the state of Israel, the Palestinian Authority announced in November 2012 that it planned to hold a vote in the U.N. General Assembly on the Authority’s request to become an observer state. According to The Wall Street Journal, “(s)uch a designation would give the Palestinian Authority the right over its airspace and territorial waters.” The Authority could participate in General Assembly debates, sponsor resolutions, and nominate candidates for Assembly committees. The Authority would be able to accede to treaties and join specialized U.N. agencies, such as the International Civil Aviation Organization, the Law of the Sea Treaty, the Nuclear Non-Proliferation Treaty, and the International Criminal Court. The Authority could thus press charges against Israelis before the Court.

The full essay is at "Keeping the Palestine Authority Down."

Taxes and Health Insurance: The United States Diverge Toward a Stronger Union

One of the main benefits of federalism is that it allows for both the tremendous power that can come from member states taking a united stance and cultural and related political interstate diversity. In other words, federalism is not only a means of checking governmental power by means of splitting governmental sovereignty between two systems of government—state and federal—but also a way of giving empires the advantages of both united action and diversity. In the case of the U.S., the power of uniting forces far surpasses the allowance for interstate diversity because consolidation in Congress and the White House has come to eclipse the power of the state governments. Although it is not sufficient to restore a semblance of balance between the two systems of government in the American federal system, it is nonetheless significant that “red” and “blue” states moved in different directions subsequent to the 2010 elections both in terms of tax and health-insurance policy. 

The complete essay is at Essays on Two Federal Empires, available at Amazon.

Bad Directors at HP: Like Guests Who Overstay?

Lest it be thought that Congress ignoring the business lobby would result in laws capable of reforming corporate governance in the U.S. in the interest of stockholders, even putting the “objectionable” stuff back into legislation may not be sufficient. In this essay, I look at the proposed elimination of plurality voting in the original Dodd-Frank bill from the perspective of the case of HP. Put simply, the question is whether it would have made any difference had the proposal been retained in the bill.


The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

Same-Sex Marriage in the States of Washington and Britain

Reporting on the objections of the Church of England and the Roman Catholic Church to David Cameron’s “contentious plan to legalize same-sex marriage” in the E.U. state of Britain, the New York Times unwittingly followed the European tendency to compare a state in the E.U. with the entire U.S. rather than to a state therein. “In some ways,” the Times contended, the debate in the E.U. state “mirrors arguments in the United States swirling around President Obama’s support for same-sex marriage.” Actually, Obama’s support was not at the time very relevant even in the U.S., as the “action” was occurring in particular states (as in the case of the E.U.).

 

On the of the Times’ report, the Huffington Post reported that the U.S. state of Washington would have a referendum on gay marriage on the ballot in November, 2012. In total, 247,331 Washingtonians signed the petition, passing the minimum of 120,577 needed. Gov. Chris Gregoire, David Cameron’s counterpart, had signed a bill into law the previous February legalizing same-sex marriage. Essentially, the referendum moved the matter from representative to direct democracy. Were a “one-size-fits-all” decision to be reached for the entire U.S., justices rather than an electorate would be the decision-makers. While possibly giving the rights of a minority a “leg up” on majority rule, moving the issue from the people of Washington to apply one decision on the U.S. as a whole was not a given at the time.

Therefore, to relate the thrashing out going on at the time in Britain (and France) to Obama’s campaign stance on the issue rather than to what was going on in the American republics evinces something more than just a category mistake (i.e., treating a state in the E.U. as equivalent to the entire U.S. rather than to a state therein). The dynamic at the level of the E.U. and U.S. is different than that which occurs in a state. Democracy being relatively fort (strong) at the state-level, the juridical protection of the rights of the individual may paradoxically be stronger at the empire-level. Iowa is a notable counter-example, however, on account of the action of the Iowa Supreme Court legalizing same-sex marriage. Perhaps it could be said that majority rule is stronger at the state level and thus more in balance with judicial decision. If so, the E.U. principle of subsidiarity and the U.S. principle of residual sovereignty (marriage being in the realm of the states’ sovereignty though equal protection being a relevant U.S.-level juridical principle) should not be relegated in a race to a central state at the empire-level. At the same time, the U.S. and E.U. need enough power to maintain themselves. Treating a state in the E.U. as if it were equivalent to the entire U.S. (i.e., essentially another E.U. within the E.U.) distorts or ignores these dynamics of federalism.

Sources:

Alan Cowell, “ChurchesChallenge British Government Over Same-Sex Marriage,” The New York Times, June 12, 2012. 

Chris Gentiviso, “Referendum 74, Washington State Anti-GayMarriage Measure, Qualifies for Ballot,” The Huffington Post, June 12, 2012.