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Controlling Shareholders and Corporate Governance: Complicating the Comparative Taxonomy

Ronald J. Gilson

Stanford Law School; Columbia Law School; European Corporate Governance Institute (ECGI)

August 2005

ECGI - Law Working Paper No. 49/2005
Stanford Law and Economics Olin Working Paper No. 309
Columbia Law and Economics Working Paper No. 281

The focus of comparative corporate governance scholarship is shifting from takeovers to controlling shareholders in recognition of the fact that public corporations everywhere but in the U.S. and U.K. are characterized by a shareholder with effective voting control. Debate is now turning to the merits of controlling shareholder systems, both on their own terms and in comparison to the U.S. and U.K. widely held shareholding pattern. To date, the debate has treated the controlling versus widely held distinction as central, disagreeing over whether a particular country owed its characteristic shareholder distribution to the quality of minority shareholder legal protection or to politics. This simple dichotomy is far too coarse to provide an understanding of the diversity of ownership structures and their policy implications. This article complicates the analysis of controlling shareholders and corporate governance by providing a more nuanced taxonomy of controlling shareholder systems. In particular, it distinguishes between efficient and inefficient controlling shareholders, and between pecuniary and non-pecuniary private benefits of control. The analysis establishes that the appropriate dichotomy is between countries with functionally good law, which support companies with both widely held and controlling shareholder distributions, and countries with functionally bad law, which support only controlling shareholder distributions. In this account, the United States and Sweden are the same side, rather than on opposite sides of the dividing line. The articles examines the different understanding of the role of controlling shareholders in corporate governance and the policy implications that flow from a taxonomy that focuses on support of diverse shareholder distributions.

Number of Pages in PDF File: 53

Keywords: controlling shareholders, corporate governance, law and finance

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Date posted: August 19, 2005  

Suggested Citation

Gilson, Ronald J., Controlling Shareholders and Corporate Governance: Complicating the Comparative Taxonomy (August 2005). ; Stanford Law and Economics Olin Working Paper No. 309; Columbia Law and Economics Working Paper No. 281. Available at SSRN: https://ssrn.com/abstract=784744 or http://dx.doi.org/10.2139/ssrn.784744

Contact Information

Ronald J. Gilson (Contact Author)
Stanford Law School ( email )
559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-723-0614 (Phone)
650-725-0253 (Fax)

Columbia Law School ( email )
435 West 116th Street
New York, NY 10025
United States
212-854-1655 (Phone)
212-854-7946 (Fax)

European Corporate Governance Institute (ECGI)
B-1050 Brussels
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