Jenner & Block

"Borrowed Voting..Perspectives on Legislation, Regulation and Litigation," AEI Legal Center for the Public Interest

The American Enterprise Institute for Public Policy Research, a well-known DC think tank, has published a monograph written by Partners William L. Tolbert, Jr., Les Lepow, and John F. Cox on "Borrowed Voting." The article examines the phenomenon of borrowed voting -- the process in which an investor pays other investors for the right to vote their securities in the election of corporate directors or any other matter of corporate governance that is put to a shareholder vote. Since the right to vote is determined by possession, not ultimate ownership, of shares, borrowed voting is generally a permissible activity. The authors examine the phenomenon of borrowed voting and conclude that one appropriate step would be to require the informed consent of a shareholder before permitting him or her to lend the votes associated with his or her shares. The authors write that this proposal is one feasible means of allowing borrowed voting to continue, while avoiding some of the controversy surrounding such transactions. The article was published by the AEI Legal Center for the Public Interest, a division of the AEI, on April 1, 2008.