E-proxies for sale? Corporate vote-buying in the Internet age

Advances in electronic communications technology promise to invigorate shar eholder voting as a viable tool for corporate governance, for example by de creasing the cost, and thereby increasing the frequency and effectiveness, of proxy fights. Increased use of shareholder voting, though, forces renewe d focus on issues related to the shareholder voting process. One such issue is vote-buying. Traditionally, courts have treated vote-buying in the corp orate context as per se illegal. More recently, however, courts have relaxe d their attitude toward such transactions, a move generally applauded by co mmentators. This article argues that the newfound judicial acceptance of vo te-buying is problematic, at least for publicly-held corporations. The arti cle examines the reasons offered in support of vote-buying in such corporat ions, and suggests that the same benefits could be obtained, without the th reat of harm presented by vote-buying, through the use of turnout payments to encourage shareholder participation in corporate voting contests. With r egard to closely-held corporations, however, the article argues that vote-b uying serves a useful preference aggregation function and generally should be permitted.