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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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Fifth Chapter: Conflicts between Cumulative Voting and Long Governance


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Fifth Chapter:  Conflicts between Cumulative Voting and Long Governance

This Chapter demonstrates the conflicts between cumulative voting and long governance, which is the third road followed by three Economy Giants. The first part analyzes the weakness of cumulative voting – representing shareholder primacy theory and pursuing private and short-term profits. The claim that the shareholder primacy norm benefits us all in the long run by ensuring the maximization of aggregate social wealth is questionable.548 After all, the “corporation” consists of a variety of constituencies, including stockholders, and even stockholders certainly are not a unified group with identical interests.549 Further, the second part demonstrates several disadvantages of the shareholder primacy so as to point out the limited influence of a shareholder-centered model which is discussed in the First Chapter as the reason for adopting cumulative voting and independent directors in China and EU. The following three parts demonstrate the long governance adopted by US, EU and China to cover the weakness of the shareholder primacy theory. In terms of the corporate governance value in the US, EU and China, there is a trend towards long governance, which has conflicts with the system of minority representatives and aspires, rather than supporting one approach over another in the fundamental debate on corporate governance, i.e. the shareholder value vs. stakeholder value ← 133 | 134 → debate, to represent an intermediate “third way”.550 It means the interests of different stakeholders should be subject to the whole benefit of corporations and deserve...

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