Controlling the Corporate Controller's Misbehaviour
The corporate governance debate mainly deals with the effectiveness of techniques to protect shareholders from the controllers' misbehaviour. This article takes a different approach. Focusing on self-dealing, it shows that effective strategies to protect investors from expropriation differ from...
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Published in | The journal of corporate law studies Vol. 11; no. 1; pp. 177 - 214 |
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Main Author | |
Format | Journal Article |
Language | English |
Published |
Routledge
01.04.2011
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Online Access | Get full text |
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Summary: | The corporate governance debate mainly deals with the effectiveness of techniques to protect shareholders from the controllers' misbehaviour. This article takes a different approach. Focusing on self-dealing, it shows that effective strategies to protect investors from expropriation differ from country to country. However, some may be more efficient than others. The inefficiency of an effective discipline of self-dealing stems from the constraints it imposes on the discretion of controlling managers and shareholders. This article shows that both the US litigation-based model and the UK governance-based model are effective against expropriation, but their efficiency can be improved. In light of this, this article recommends restricting the influence of non-controlling shareholders to the selection of a minority of independent directors, whose task should be limited to monitoring and validating self-dealing. These findings can be extended from self-dealing to similar conflicts of interest that may lead to expropriation of shareholders, and to their regulation in other jurisdictions. |
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ISSN: | 1473-5970 1757-8426 |
DOI: | 10.5235/147359711795344154 |