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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


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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Second Chapter: Negative Attitudes towards Cumulative Voting in the US and the EU


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Second Chapter:  Negative Attitudes towards Cumulative Voting in the US and the EU

The voting right of shareholders to select supervisors and directors is the most important type of shareholder rights and perhaps the only fundamental way for shareholders to exercise control in corporate affairs.153 Having originally been drafted as a way to protect minority shareholders from the “overreaching” of a majority who could form rings to control absolutely and abuse and plunder the property of the minorities by allowing a shareholder to multiply the number of votes that he/she has, as determined by the number of shares he holds, by the number of directors to be elected and cast all his/her votes for any one candidate or distribute his/her votes among the candidates in any way he/she chooses,154 cumulative voting has been deregulated in the US and is not adopted in the EU.

A.    Importance of Voting Right

In essence, cumulative voting is a method of voting. Prior to discussing it, we should demonstrate the importance of shareholders’ voting rights. A well-known, often-quoted Delaware opinion in Blasius Industries v. Atlas Corporation states that “the shareholder franchise is the ideological underpinning upon which the legitimacy of directorial power rests”155. As the court explains, voting rights are “critical to the theory that legitimates the exercise of power by some (directors and officers) over vast aggregations of property that they do not own”156. Robert Monks and Nell Minow perceive...

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