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In this essay, we contest one of the main arguments for restricting corporate board voting to shareholders. In justifying the limitation of the franchise to shareholders, scholars have repeatedly turned to social choice theory—specifically, Arrow's theorem—to justify the exclusive shareholder franchise. Citing to the theorem, corporate law commentators have argued that lumping different groups of stakeholders together into the electorate would result in a lack of consensus and, ultimately, the lack of coherence that attends intransitive social choices, perhaps even leading the corporation to self-destruct. We contend that this argument is misguided. First, we argue that scholars have greatly overestimated the relative likelihood of cyclical outcomes with an expanded electorate. Second, even if a nascent intransitivity were to occur, there is almost no chance that it would manifest itself in inconsistent corporate decisions, much less ones that would cause a firm to self-destruct. Moreover, the exclusive shareholder franchise, like any other preference aggregation system, may avoid violating one of the conditions of Arrow's theorem only by violating another—a tradeoff that has never been explicitly acknowledged or defended. Ultimately, we argue that Arrow's theorem fails to support the limitation of corporate voting rights to shareholders.

The doctrine of shareholder primacy has received substantial attention from its legions of proponents, its indefatigable opponents, and even its disinterested observers. The notion that a corporation should be run in the interests of its shareholders is the theoretical foundation upon which modern corporate law stands. Almost all empirical study in corporate law is premised on a notion of shareholder primacy, and these results would lose much of their meaning if the theory were somehow disproved. Perhaps most importantly, shareholders do in fact have primacy of place within the corporation, as they alone generally have the right to elect the firm's directors. Despite the importance of shareholder primacy to the American (and increasingly global) corporation, there is one aspect of shareholder primacy theory that has not received sustained scholarly critique. In justifying the limitation of the franchise to shareholders, scholars have repeatedly turned to social choice theory-specifically, Arrow's theorem-to raise concerns about expanding the corporate electorate. Arrow's theorem posits that no social choice function, including any voting procedure, can simultaneously fulfill four conditions of democratic fairness and guarantee a transitive outcome. Citing the theorem, corporate law commentators have argued that combining different stakeholders together into the electorate would result in a lack of consensus and, ultimately, the lack of coherence that attends intransitive social choices. Plagued by these voting pathologies, a corporation with such an electorate could even be led to "self-destruct." This argument from Arrow's theorem, however, overestimates the concerns raised by the theorem about the aggregation of more diverse preferences. Almost any time that different viewpoints are converted into social choices, disparate preferences must be reconciled. In fact, the only way around this would be to assume that shareholders will never disagree-increasingly a flawed premise. More importantly, the argument ...

The two most influential traditions of contemporary theorizing about democracy, social choice theory and deliberative democracy, are generally thought to be at loggerheads, in that the former demonstrates the impossibility, instability or meaninglessness of the rational collective outcomes sought by the latter. We argue that the two traditions can be reconciled. After expounding the central Arrow and Gibbard-Satterthwaite impossibility results, we reassess their implications, identifying the conditions under which meaningful democratic decision making is possible. We argue that deliberation can promote these conditions, and hence that social choice theory suggests not that democratic decision making is impossible, but rather that democracy must have a deliberative aspect.

The two most influential traditions of contemporary theorizing about democracy, social choice theory and deliberative democracy, are generally thought to be at loggerheads, in that the former demonstrates the impossibility, instability or meaninglessness of the rational collective outcomes sought by the latter. We argue that the two traditions can be reconciled. After expounding the central Arrow and Gibbard-Satterthwaite impossibility results, we reassess their implications, identifying the conditions under which meaningful democratic decision making is possible. We argue that deliberation can promote these conditions, and hence that social choice theory suggests not that democratic decision making is impossible, but rather that democracy must have a deliberative aspect.

AbstractThe paper considers Mackie's defence of 'populist' democracy against the critique offered by Riker and the Rochester School. Riker has two arguments against populism: first that Arrow's theorem shows there is no such thing as the general will, second, that once we have chosen a social decision mechanism the results may not represent the true wishes of the population since people may vote strategically. Mackie argues Arrow's theorem is misleading since the independence condition is not itself substantively rational, and that manipulation never actually occurs. The paper shows that independence is needed for interpretation and prediction, and whilst Arrow's strong condition may not be 'substantively rational', examples show that no single decision mechanism, even Mackie's favoured Borda count is obviously superior. It then argues that every election can, in Arrow's terms, be considered as manipulated – though there is nothing substantively wrong in that. The paper ends by pointing out that in the absence of complete information market outcomes are also similarly manipulated.

Covers topics such as: models of economic exchange and production, uncertainty, optimality, public goods, social improvement criteria, life and death choices, majority voting, Arrow's theorem, and theories of implementation and mechanism design. This book aims to make value judgments about economic and political mechanisms

In his seminal Social Choice and Individual Values, Kenneth Arrow stated that his theory applies to voting. Many voting theorists have been convinced that, on account of Arrow's theorem, all voting methods must be seriously flawed. Arrow's theory is strictly ordinal, the cardinal aggregation of preferences being explicitly rejected. In this paper I point out that all voting methods are cardinal and therefore outside the reach of Arrow's result. Parallel to Arrow's ordinal approach, there evolved a consistent cardinal theory of collective choice. This theory, most prominently associated with the work of Harsanyi, continued the older utilitarian tradition in a more formal style. The purpose of this paper is to show that various derivations of utilitarian SWFs can also be used to derive utilitarian voting (UV). By this I mean a voting rule that allows the voter to score each alternative in accordance with a given scale. UV-k indicates a scale with k distinct values. The general theory leaves k to be determined on pragmatic grounds. A (1,0) scale gives approval voting. I prefer the scale (1,0,-1) and refer to the resulting voting rule as evaluative voting. A conclusion of the paper is that the defects of conventional voting methods result not from Arrow's theorem, but rather from restrictions imposed on voters' expression of their preferences. The analysis is extended to strategic voting, utilizing a novel set of assumptions regarding voter behavior.

This book discusses collective decision making from the perspective of social choice and game theory. The chapters are written by well-known scholars in the field. The topics range from Arrow's Theorem to the Condorcet and Ostrogorski Paradoxes, from vote distributions in the European Council to influence processes and information sharing in collective decision making networks; from cardinal utility to restricted domains for social welfare functions; from rights and game forms to responsibility in committee decision making; and from dueling to bargaining. The book reflects the richness and diversity of the field of collective decision making and shows the usefulness and adequacy of social choice and game theory for the study of it. It starts with typical social choice themes like Arrow's Theorem and ends with typical game theoretical topics, like bargaining and interval games. In between there is a mixture of views on collective decision making in which both social choice and game theoretic aspects are brought in. The book is dedicated to Harrie de Swart, who organized the well-known Social Choice Colloquia at the University of Tilburg in the Netherlands.

Voting -- Two candidates -- Social choice functions -- Criteria for social choice -- Which methods are good? -- Arrow's theorem -- Variations on the theme -- Apportionment -- Hamilton's method -- Divisor methods -- Criteria and impossibility -- The method of Balinski and Young -- Deciding among divisor methods -- History of apportionment int he United States -- Conflict -- Strategies and outcomes -- Chance and expectation -- Solving zero-sum games -- Conflict and cooperation -- Nash equilibria -- The prisoner's dilemma -- The electoral college -- Weighted voting -- Whose advantage?