Voting Trusts and Antitrust: Rethinking the Role of Shareholder Rights and Private Litigation in Public Regulation, 1880s to 1930s

Abstract

Scholars have long recognized that the states’ authority to charter corporations bolstered their antitrust powers in ways that were not available to the federal government. But they have also argued that the growth of large-scale enterprises operating in national and even international markets forced states to stop prosecuting monopolistic combinations out of fear of doing serious damage to their domestic economies. Our paper has revised this conventional view by focusing attention on the lawsuits that minority shareholders brought against their own companies in state courts of law and equity, especially suits that challenged the anticompetitive use of voting trusts. Historically judges had been reluctant to intervene in corporations’ internal affairs and had displayed a particular wariness of shareholders’ private actions. By the end of the nineteenth century, however, they had begun to revise their views and to see shareholders’ private actions as useful checks on economic concentration. Although the balance between judges’ suspicion of and support for shareholders’ activism shifted back and forth over time, the long-run effect was to make devices like voting trusts unsuitable for the purposes of economic concentration.