Chapter 3
The interest of Shareholders as a class
This chapter examine how the corporate governance structures mitigates the manager-shareholders
conflicts; focus on publicly traded firms, although much of our discussion applies equally to companies that
are not actively traded.
Appointment rights and shareholders interests
Two are the features at the basis of corporate governance:
1. investor ownership: ultimate control to the firm lies partially or entirely in the hands of the
shareholders
2. delegated management: shareholders is usually exercised indirectly, by electing directors
■ Managerial Power and corporate boards
The governance law of public or “open” corporation is similar in all core jurisdiction; certain fundamental
decision are reserved to the general shareholder meeting while much decision making power to the board
of director (1 or 2 tier board).
- “one-tier board” (U.S., UK, Japan, Italy) one board exercise the legal power to supervise and manage a
corporation (also through Committees); concentrate decision power.
- “two tier board”: (Germany and Netherlands, Italy): monitoring powers are allocated to elected
“supervisory board” of non-executive directors; the “management board” (elected by supervisory board)
design and implement business strategy; favor the collective decision making (italy and france permit
domestic companies to choose between one and two tier board).
■ Nominating directors and the mechanism of voting
All of our core jurisdiction apart from the US, allow shareholders to nominate directors;
ordinarily:
○ the board proposes the company’s slate of nominees
○ the annual general shareholders meeting approves
○ shareholders (usually a small percentage) can contest the boards slate by adding additional nominees to
the agenda; in U.S. shareholders can only solicit or support materials to contest the company’s slate of
nominees.
Voting rules for the board seat at the annual meeting follow a majority voting rule → directors are elected
by a majority of the votes cast at the shareholders meeting.
By contrast in the Us is a “plurality voting rule” → any number of vote suffices to elect a nominee to the
board seat ( even few favorable votes can elect because dissident cannot vote against the company’s
The interest of Shareholders as a class
This chapter examine how the corporate governance structures mitigates the manager-shareholders
conflicts; focus on publicly traded firms, although much of our discussion applies equally to companies that
are not actively traded.
Appointment rights and shareholders interests
Two are the features at the basis of corporate governance:
1. investor ownership: ultimate control to the firm lies partially or entirely in the hands of the
shareholders
2. delegated management: shareholders is usually exercised indirectly, by electing directors
■ Managerial Power and corporate boards
The governance law of public or “open” corporation is similar in all core jurisdiction; certain fundamental
decision are reserved to the general shareholder meeting while much decision making power to the board
of director (1 or 2 tier board).
- “one-tier board” (U.S., UK, Japan, Italy) one board exercise the legal power to supervise and manage a
corporation (also through Committees); concentrate decision power.
- “two tier board”: (Germany and Netherlands, Italy): monitoring powers are allocated to elected
“supervisory board” of non-executive directors; the “management board” (elected by supervisory board)
design and implement business strategy; favor the collective decision making (italy and france permit
domestic companies to choose between one and two tier board).
■ Nominating directors and the mechanism of voting
All of our core jurisdiction apart from the US, allow shareholders to nominate directors;
ordinarily:
○ the board proposes the company’s slate of nominees
○ the annual general shareholders meeting approves
○ shareholders (usually a small percentage) can contest the boards slate by adding additional nominees to
the agenda; in U.S. shareholders can only solicit or support materials to contest the company’s slate of
nominees.
Voting rules for the board seat at the annual meeting follow a majority voting rule → directors are elected
by a majority of the votes cast at the shareholders meeting.
By contrast in the Us is a “plurality voting rule” → any number of vote suffices to elect a nominee to the
board seat ( even few favorable votes can elect because dissident cannot vote against the company’s
