More good points Delaware law journal -prefs, sorry
A. The Corporate Decisional Calculus
Corporate decision-makers (e.g., the officers and/or the board) can be induced to take heed of investors' interests primarily by three familiar mechanisms: the investors' power to replace the decision-makers, the alignment of interests between investors and the decision-makers, and the firm's capital market reputation. In standard governance arrangements, these inducement mechanisms are over-allocated to the common, mildly under-allocated to debt, and allocated hardly at all to the preferred. Alignment of
interests almost always redounds to the common's benefit, as directors and managers frequently are paid in part with common equity interests and essentially never with preferred. Thus, common stockholders can confidently anticipate that the board will at least attempt to increase the share price of the common. In most corporations, the common equity also elects the board, and, as noted above, they enjoy the protections of fiduciary duties as against the preferred. Creditors have no direct representation on the board, but they hold the greatest leverage in terms of capital market reputation. Firms more frequently need to roll over their debt than raise new equity;if they wish to secure low-cost financing, they need to establish a reputation in the debt markets for good capital stewardship.
Preferred stock, by contrast, has little input into or sway over firm policy.
