Comparative Company Law Shareholder Protection: A Leximetric Approach Mathias Siems & Priya Lele Centre for Business Research University of Cambridge CBR Summit: 29-30 March 2006 Innovation and Governance
I. Shareholder protection index (extract) CBR Summit: 29-30 March 2006 Innovation and Governance
I. Shareholder protection index 60 variables which function as proxies for shareholder protection in general � For instance, for protection against majority shareholders: – mandatory law – public enforcement – quorum and supermajority requirements – fiduciary principles – appraisal rights CBR Summit: 29-30 March 2006 Innovation and Governance
II. Coding the Law • Coding shareholder protection for the UK, the US, Ger- many, France, and India for the last 35 years; e.g., CBR Summit: 29-30 March 2006 Innovation and Governance
II. Coding the law • Problems in coding the law: e.g., – not only mandatory but also default rules – not only statutory but also case law – not only “formal law”, but also Table A, corporate governance rules, and listing rules – not only binary numbers but also non binary numbers CBR Summit: 29-30 March 2006 Innovation and Governance
III.1: General aggregate (60 variables) 40 38 36 UK 34 US 32 France Germany 30 India 28 26 24 1970 1975 1980 1985 1990 1995 2000 2005 CBR Summit: 29-30 March 2006 Innovation and Governance
III.2: Protection against boards (42 var.) 31 29 27 UK US 25 France 23 Germany India 21 19 17 1970 1975 1980 1985 1990 1995 2000 2005 CBR Summit: 29-30 March 2006 Innovation and Governance
III.3: Protection against other shareholders (18 variables) 15 14 13 12 UK 11 US 10 France Germany 9 India 8 7 6 5 1970 1975 1980 1985 1990 1995 2000 2005 CBR Summit: 29-30 March 2006 Innovation and Governance
Again: General aggregate (60 variables) 40 38 36 UK 34 US 32 France Germany 30 India 28 26 24 1970 1975 1980 1985 1990 1995 2000 2005 CBR Summit: 29-30 March 2006 Innovation and Governance
III.4: Difference from French law (max: 60) 30 28 26 24 Germany 22 UK 20 US 18 India 16 14 12 10 1970 1975 1980 1985 1990 1995 2000 2005 CBR Summit: 29-30 March 2006 Innovation and Governance
III.5: Difference from English law (max: 60) 30 28 26 24 Germany 22 France 20 US 18 India 16 14 12 10 1970 1975 1980 1985 1990 1995 2000 2005 CBR Summit: 29-30 March 2006 Innovation and Governance
III.6: Mean of all differences (max. 60) 22 21 20 19 18 17 1980 1985 1990 1995 2000 2005 CBR Summit: 29-30 March 2006 Innovation and Governance
IV. Final remarks “Not everything that counts can be counted, and not everything that can be counted counts.” (Sign hanging in Albert Einstein’s office at Princeton) How it will be going on CBR Summit: 29-30 March 2006 Innovation and Governance
Annex: (main) variables I. Protection against board and management : 1. Powers of the general meeting; 2. Agenda setting power; 3. Extraordinary shareholder meeting; 4. Anticipation of shareholder decision; 5. Information in the run-up of the general meeting; 6. Shares not blocked before general meeting; 7. Individual information rights; 8. Communication with other shareholders; 9. Board composition; 10.No excessive remuneration; 11. Performance based remuneration; 12. Duration of director’s appointment; 13. Directors duties; 14. Shareholder supremacy; 15. Preemptive rights; 16. Director’s disqualification; 17. Corporate governance code; 18. Public enforcement of company law CBR Summit: 29-30 March 2006 Innovation and Governance
Annex: (main) variables II. Protection against other shareholders : 1. Quorum; 2. Supermajority requirements; 3. One share - one vote; 4. Cumulative voting; 5. Voting by interested shareholders prohibited; 6. No squeeze out; 7. Right to exit; 8. Disclosure of major share ownership; 9. Oppressed minority; 10. Shareholder protection is mandatory CBR Summit: 29-30 March 2006 Innovation and Governance
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