The Australian Sports Commission's "Governance Reform in Sport" Discussion Paper and Voting Rules in Corporate Constitutions

The Australian Sports Commission’s 2015 Governance Reform in Sport Discussion Paper proposes to limit voting by members of a National Sporting Organisation to essentially the minimal set of issues required by the Corporations Act 2001 (Cth), and to further mandate the voting rule to be adopted for each issue. The authors critique the Discussion Paper and argue that three issues require discussion as deciding which voting rules to implement — the efficiency of the proposed voting rules, the efficiency of mandatory rules in corporate governance regulation and the balance of power between members and directors. They argue that constitutional voting rules ought to minimise the sum of the decision-making costs and the external costs of the issue to be determined. These two costs of voting depend upon the nature of the issue itself and crucially, upon the identity, the number and the preference heterogeneity of the voting members. There is no ex ante reason to assume that a simple majority or any other mandatory voting rule is optimal.