What is Common-Law Voting?

Malcolm Tatum

Common-law voting is a practice in which each shareholder is granted one vote during an election process. Within the structure for common law voting, the number of shares held by a given shareholder is not taken into consideration. Shareholders with hundreds of shares in their possession will have no more voting rights within the process than a shareholder who is in possession of a single share.

Proponents of common-law voting believe that this procedure simplifies the voting process.
Proponents of common-law voting believe that this procedure simplifies the voting process.

The actual usage of common-law voting among corporations is very rare. Proponents of the approach tend to point out that common-law voting makes the process of holding an election very simplistic. If a corporation currently has fifty shareholders, there are only fifty votes to be counted.

This is in contrast to situations where the number of votes per shareholder is determined by the number of shares currently held. In this scenario, it is necessary to verify the number of shares held by each shareholder as of a certain date. Based on factors outlined in the bylaws of the company, it is then necessary to calculate the number of votes extended to each shareholder.

After the votes are cast, it is often necessary to again qualify the votes received and make sure they were cast within the perimeters of the guidelines. Since common-law voting typically allows shareholders with active shares as of the date of the election to participate, and nothing other than proof of holding a single share is required, the voting process can move along swiftly.

Opponents to common-law voting point out that people with a higher rate of investment in the company should also have a greater voice in the election of directors and other matters that are of concern to the shareholders. While the process of qualifying and tabulating votes may be slightly more complicated than the common-law voting approach, most analysts agree the process does not present any difficult problems. As a result, very few companies today employ the practice of common-law voting, except under specific conditions that are explicitly addressed in the bylaws of the company.

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