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The Role of Representatives of Minority Shareholders in the System of Corporate Governance

In the Context of Corporate Governance in the US, EU and China

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Wenjia Yan

Due to the global influence of the shareholder-centered model of the US, both China and the EU have taken more measures to protect minority shareholders. In this respect, the representation of minority shareholders on the board, in particular the system of cumulative voting which was originally designed by the US to protect minority shareholders, has become a frequently-discussed issue in China and the EU. This study of comparative law is based upon the comparison of the attitudes among the US, China and the EU towards cumulative voting. By analyzing some empirical investigations and massive literatures of American academics as the theoretical foundation, it tries to demonstrate whether the convergence of corporate governance towards the shareholder-centered model is inevitable.

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Conclusion: Convergence of the Value and Diversity of the Approaches for Protecting Minority Shareholders

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Conclusion:  Convergence of the Value and Diversity of the Approaches for Protecting Minority Shareholders

Based on the different attitudes among the three economy giants for cumulative voting – which is a small yet impossible-to-be-ignored system designed for minority shareholders’ protection in PLCs – this dissertation concludes that despite the importance of minority shareholders’ protection, the means for this purpose in terms of the insider corporate governance system is regulating RPTs, which is limited by the long-term development of corporations because both the stakeholder- and shareholder-centered models have been modified and come to converge into the long governance model. Moreover, there is a persistence of diversity in the ways of controlling self-dealing and realizing the long governance.

The entire US corporate governance system relies on the independence and the fiduciary duty of directors to find a happy medium that carefully balances two competing values, namely the authority and accountability of the directors, rather than purely pursuing maximization of shareholder’ interests by business judgment rule. This approach would tend to emphasize long-term value over short-term gain, even if certain constituencies would prefer a short-term gain, while leaving room for the board to decide how to allocate value when circumstances require a trade-off among constituencies. In this respect, these arrangements are beneficial to the professional managers and designed to preserve the power of directors and managers in controlling corporation. At the level of European corporate law, the (supervisory) board includes employee representatives and independent directors without minority...

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