Minority Shareholders’ Rights, Powers and Duties: The Market for Corporate Influence
Chapter in Afra Afsharipour & Martin Gelter (eds.), Research Handbook on Comparative Corporate Governance (Edward Elgar, Forthcoming)
NUS EW Barker Centre for Law & Business Working Paper 20/04
26 Pages Posted: 24 Feb 2020 Last revised: 27 Feb 2020
Date Written: February 24, 2020
Conventional corporate law scholarship attributes a high degree of homogeneity to minority shareholders. For example, the agency problems approach identifies conflicts between shareholders and managers in the case of companies with dispersed shareholding, and conflicts between minority shareholders and controlling shareholders for companies with concentrated shareholding. However, recent trends establish that minority shareholders come in different hues. Large institutional investors have mostly crowded out retail shareholders from the stock markets. Even within the institutional variety, differences abound. The current corporate governance paradigm fails to account for the diversity among minority shareholders and their interests.
In this chapter, I seek to establish that the assumptions regarding the homogeneity of minority shareholders are no longer valid due to market developments that have radically altered minority shareholder demographics in companies the world over. I argue that the expanding schism between the identity, outlook, actions and interests of varieties of minority shareholders creates agency problems among types of minority shareholders. This calls for a paradigm shift in corporate law’s treatment of minority shareholders. The ability of one type of minority shareholders to affect the interests of others would call for the imposition of restraints on minority shareholder behaviour.
Keywords: Corporate governance, minority shareholders, institutional investors, hedge funds, shareholder duties
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