Stakeholders and the composition of the voting rights of the board of directors

Dan Galai, Zvi Wiener*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

10 Scopus citations


We propose a new approach to dynamic representation of different groups of stakeholders on the board of directors. This approach is based on a simple economic model of the firm, with an objective function to maximize its market value. We look at the marginal claim of each stakeholder on the assets of the firm. It divides the voting rights based on the change in value of each stakeholder with a one dollar change in the value of the firm as a whole. We translate these conditions to relative voting powers on the board. While there are many claims in the academic and popular literature on sharing voting rights on the board, our paper is the first to propose a quantitative dynamic model of the power sharing in the corporation.

Original languageAmerican English
Pages (from-to)107-117
Number of pages11
JournalJournal of Corporate Finance
Issue number2
StatePublished - Apr 2008

Bibliographical note

Funding Information:
We are grateful to Yaakov Amihud, Zvi Bodie, Uriel Procaccia, Jan Rivkin, Roy Smith, Eric Talley, David Yermack, and Moran Ofir, and the participants of the Corporate Governance Seminar at the Stern School of Business, NYU, and the participants of seminars at Boston University, The Hebrew University and at the IDC for their helpful comments. We also acknowledge the helpful comments of an anonymous referee of the journal and its editor. The authors acknowledge grants from the Zagagi Center, the Abe Gray Chair, and the Krueger Center at the Hebrew University and thank June Dilevsky for editorial assistance.


  • Board of directors
  • Contingent claims
  • Corporate governance
  • Stakeholders
  • Voting rights


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