Rights, Status, and Protection of Shareholders in Public Companies
Date Issued
2008
Date
2008
Author(s)
Lin, Wei-Liang
Abstract
The purpose of this thesis is to clarify the nature of shareholder’s rights, and to define their proper status in the public companies, according to this study, then to review and to make adjustments to the system of shareholder protection. Traditionally, we intuitionally view shareholder as the owner of the company. This viewpoint of property, however, is defective and questionable in theory and in practice. Therefore, inspiring by Contractual Theory, I consider that shareholder is just one of the kinds of parties who have contract with the company, as my main opinion for reviewing the concept of “shareholder.”he first part of this thesis is a brief introduction of Contractual Theory, and the discussion of nature of shareholder’s rights. Contractians hold that the company is “the nexus of contracts,” a combination of both explicit and implicit contracts. Under this theory, the differences of rights held by the shareholders and other participants are just the terms of their contracts. In a nature meaning, they are all the same; shareholders also bargain for their own interest and try to reach the balance between the parties. They invest their resources into the company for exchanging for the rights to participate in the distribution of profits, as the others do. Therefore, their rights are due to their negotiations, not inherent ones from the property they have ever owned.he second part is the discussion of the status of shareholder, which is divided into 2 sections. First, we review the “shareholder wealth maximization norm,” and then the concept of “shareholder as the owner of the company.” This thesis takes the viewpoint that the company entity shall exist for their own purpose, not for the service for any participants, such as shareholders. This means that shareholder wealth maximization should not be regarded as a statutory norm, but understood in the context of the unique enterprise culture. Outside of the contractual obligations and statutory requirements, the company is free to decide to what extent of corporate social responsibility it would like to take. And its culture should be tested by the taste of market, not the government.hough, theoretically, shareholder is better protected by the way of “ownership relationship” than “contractual relationship,” this claim is hardly sustained after taking account of the shareholding structure of the public companies, that is, the dispersion of shareholders. Most of them don’t view themselves as the “owners” and are passive to the affairs of company. Even though the controlling shareholders have better incentives to monitor the management, they may become another hard-controlled power axis, if we over-emphasize their function and empower them. In conclusion, it’s not appropriate to define shareholder as the owner of the company, after all they can’t function that role (as a monitor of the management) well, at least in public companies.hareholder, however, still needs some but limited control means, because of the specialty of their contracts. In this idea, shareholder could be viewed as ONE of the mechanisms of corporate governance, which achieve the function of owner altogether. In this chapter, rights to vote, to transfer, to bring the suit, and access to the information are all critical and important, and effective on different kinds of shareholders. For the changing figure of shareholders, the system of shareholder protection should also be made certain adjustments, including the dimensions in (a) the nature of the company, (b) shareholder activism, (c) general meeting, (d) controlling shareholders, and (e) derivative suit.
Subjects
status of shareholder
separation of ownership and control
Contractual Theory
Nexus of Contracts
shareholder wealth maximization norm
shareholder primacy
owner
ownership
control
SDGs
Type
thesis
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