Professor Joel Seligman's article, Equal Protection in Share- holder Voting Rights: The One Common Share, One Vote Contro- versy,' is an impressive accomplishment in many respects. It confirms his status as premier historian of our securities laws and markets.2 It also provides a powerful analysis of, and the first se- rious argument against, dual class capitalization, and proposes a thoughtful solution to the problems it raises. Despite these formi- dable assets, some of Professor Seligman's conclusions are debata- ble. First, Professor Seligman argues that the Securities and Exchange Commission (SEC) can impose on the National Associa- tion of Securities Dealers (NASD) and the stock exchanges (col- lectively, the "securities markets") rules forbidding dual class common stock among companies listed for trading.3 Further, Pro- fessor Seligman argues that such rules would be wise.4
This Reply argues that both his positions are ill-founded. Part I analyzes the SEC's power to forbid dual class capitalization. Part II discusses the concept of efficiency in corporate law and proce- dural safeguards to limit dual class capitalization to situations in which it is efficient. It further provides a theoretical discussion of the efficiency of dual class capitalization. Part III advances a counterproposal to Professor Seligman's position, as well as that of Professor Daniel Fischel. Although Professor Seligman is right that dual class capitalization creates dangers, new legislation can allow such capitalization, yet protect against these dangers. Un- like his proposed prohibition, this new legislation should permit dual class stock if it will not injure public shareholders.
Joel Seligman, Common Stock
Place of Original Publication
George Washington Law Review
54 Geo. Wash. L. Rev. 725 (1986)
Dent, George W., "Dual Class Capitalization: A Reply to Professor Seligman" (1986). Faculty Publications. 446.