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

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. Our paper contributes to this literature by focusing attention on the relevance for competition policy of lawsuits brought by minority shareholders against their own companies, especially lawsuits challenging voting trusts. Historically judges had been reluctant to intervene in corporations’ internal affairs and had been wary of the potential for opportunism in shareholders’ derivative suits. By the end of the nineteenth century, however, they had begun to revise their views and see shareholders as useful allies in the struggle against monopoly. Although the balance between judges’ suspicion of and support for shareholders’ activism shifted back and forth over time, in the end the lawsuits provoked state legislatures to strengthen antitrust policy by making devices like voting trusts unsuitable for purposes of economic concentration.