The Fat Controller - Slimming Down the Excesses of Controlling Shareholders in UK Listed Companies

Abstract

It has become fashionable to extoll the benefits of an incumbent controlling shareholder in companies. Indeed, many of the failures of the stewardship movement, that encourages shareholders in UK listed companies to take an interventionist approach to their investments, have been blamed on the prevalence of dispersed and fragmented ownership models. However, in the publicly listed company sphere, it is debatable whether the virtues of controlling shareholders outweigh the potential detriments, as evidenced by the corporate governance travails of Sports Direct International plc. This paper summarises the principal inherent benefits and detriments, and how these may have presented themselves in the experience of Sports Direct International plc; followed by a normative analysis of the effectiveness of certain regulations ostensibly created to constrain controlling shareholders, together with proposals for reform, arguing that the existing regulations have proved to be insufficient in constraining the controlling shareholder of Sports Direct International plc.

Keywords: Controlling shareholders, Sports Direct, Independent Directors, Related Party Transactions, Listing Rules, Corporate Governance Code

JEL Classification: G30, G32, G34, G38, K22