Strategic voting – situations where voters place their votes according to their assessment of how other voters will behave rather than according to their actual preference – results in distorted decisionmaking. Strategic voting can cause the company to lose desired transactions and can also be used to coerce voters into accepting alternatives they would have otherwise rejected. An analysis of the various types of strategic voting situations which arise in corporate law demonstrates the author's argument that strategic voting is inherent in the voting mechanism, regardless of the type of group involved or of the decision being made. Maintaining a free and unrestricted voting environment is imperative in order to maximize the voting system's potential as a tool for expressing the true "group preference," which is a measure of transaction efficiency and serves to better the group's position. To achieve this goal the author proposes a combined solution: first, the adoption of a simple majority rule in all group votes, which will significantly limit the effect of holdouts; second, the elimination of coerced voting by prohibiting individuals from acting contrary to the majority decision in cases where such actions might adversely affect the group. Requiring the entire group to adopt a unified course of action will eliminate the free rider problem, the prisoner's dilemma problem, and the coordination problem.
Business Organizations Law | Law
Controlling Strategic Voting: Property Rule or Liability Rule,
Calif. L. Rev.
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/3564