Institutional EYE: By invitation

Some examples of countries where minority shareholders can elect independent directors

The OECD’s “Owners of the World’s Listed Companies”, published in 2019, provides a detailed breakdown of the shareholder composition of almost 10,000 companies representing 90% of the global market capitalization.[1] The overall picture it paints is of concentrated ownership in most developed, emerging and frontier markets – “Ownership concentration at the company level is commonly observed across markets (Exhibit 1). In half of the world’s publicly listed companies the three largest shareholders hold 50% of the capital and in three-quarters of the companies do the three largest owners hold more than 30% of the capital. In most markets, private corporations or strategic individuals appear as the largest shareholders in individual companies.”

The potential for misalignment between dominant and minority shareholders is reflected in an impressive array of legal and regulatory mechanisms across jurisdictions intended (with varied degrees of success) to provide the latter with some means to check behavior by the company that disproportionately benefit controllers. Such measures include, but are by no means limited to ex-ante requirements for independent director or supermajority or majority-of-the-minority approval of certain types of transactions (especially those where the controlling shareholders may have a conflict of interest) and ex post means of redress, for example suits under US law for violation of controlling shareholders’ fiduciary duty to the company or UK company law actions alleging “unfair prejudice”.

You can read ‘Some examples of countries where minority shareholders can elect independent directors’ in this guest piece by Mike Lubrano, Principal, Lubrano Advisory Services LLC. LINK.

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