Private Enforcement of Directors’ Duties: Derivative Actions as a Global Phenomenon

Stefan Wrbka, Steven Van Uytsel and Mathias Siems (eds.), Collective Actions: Enhancing Access to Justice and Reconciling Multilayer Interests?, Cambridge: Cambridge University Press, 2012, pp. 93-116

23 Pages Posted: 30 Oct 2010 Last revised: 26 Apr 2013

See all articles by Mathias Siems

Mathias Siems

European University Institute (EUI); University of Cambridge - Centre for Business Research; European Corporate Governance Institute (ECGI)

Date Written: November 16, 2010

Abstract

When directors are in breach of their duties, it seems natural to give shareholders a claim for compensation. However, directors’ duties are owed to the company, not shareholders individually. This raises the question of whether individual shareholders can sue for compensation on behalf of the company. In some legal systems such derivative actions have been in place for a long time, but, recently, many other legal systems have also introduced or facilitated them. Still, there is considerable diversity around the world. In this paper I explore how the availability of derivative actions is related to other differences between countries, for instance, the common law/civil law divide, the ownership structure of firms, and other questions of shareholder protection and civil procedure. The main result is that today the common law/civil divide does not account for the differences and similarities in the law of derivative actions across countries. However, a quantitative analysis of 25 legal systems still confirmed a legal family effect in 1995 which could also be linked to differences in the ownership structure of firms. Other explanatory hypotheses could not be confirmed: cultural characteristics have not stopped countries such as Japan or China from incorporating rules on derivative actions into their company laws. It was also not found that legal systems use derivative actions as an ex-post substitute for other forms of shareholder protection; rather, different forms of shareholder protection can be regarded as complements.

Keywords: derivative actions, derivative suits, derivative claims, comparative corporate governance, leximetrics, legal families, legal origins, dispersed shareholder ownership

JEL Classification: C80, G34, K22, K40, N20, N40, P50

Suggested Citation

Siems, Mathias, Private Enforcement of Directors’ Duties: Derivative Actions as a Global Phenomenon (November 16, 2010). Stefan Wrbka, Steven Van Uytsel and Mathias Siems (eds.), Collective Actions: Enhancing Access to Justice and Reconciling Multilayer Interests?, Cambridge: Cambridge University Press, 2012, pp. 93-116, Available at SSRN: https://ssrn.com/abstract=1699353 or http://dx.doi.org/10.2139/ssrn.1699353

Mathias Siems (Contact Author)

European University Institute (EUI) ( email )

Via Bolognese 156 (Villa Salviati)
Firenze, 50139
Italy

HOME PAGE: http://www.eui.eu/siems

University of Cambridge - Centre for Business Research ( email )

Top Floor, Judge Business School Building
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Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.cbr.cam.ac.uk/people/research-associates/mathias-m-siems/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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1000 Brussels
Belgium

HOME PAGE: http://ecgi.global/users/mathias-siems

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