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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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Issues of corporate governance are currently found on most countries’ political agendas, including those of the most important Economy giants around the world, such as Europe, China and the US. In the current company law debate, corporate governance doubtlessly tends to be overshadowed by the prevailing Anglo-American law, whose corporate governance systems have significant global influence.1 According to United States scholars writing on the subject with little dissent, the agreement is that the convergence will center upon a set of governance parameters closely resembling the American model of corporate governance.2 At the end of the last century, Professor D. Gordon Smith asserted in a very well-regarded piece that the shareholder primary theory “was one of the most overrated doctrines in corporate law.”3 In terms of considering the corporation’s objective, shareholder primacy is often the only theory set out in most finance and economics texts, as well as many law texts. Undoubtedly, there is substance in what Professor Stephen Bottomley states, adopting the view that the theory “exercises a powerful grip on the mind-set of corporate managers and officers.”4 In their article The End of History for Corporate Law, Professors Hansmann and Kraakman conclude that the other primary models of managerial power, including labor influence or state control, have failed and that the US model of shareholder primacy – which encourages the related depth of the capital markets – can inevitably reduce the cost of capital for corporations and will continue to prevail.5 They recognize that even with a...

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