Controlling, Major and Minority Shareholders: Interaction and Legal Regulation Problems in Russia

Abstract

For the last several years the term corporate governance for domestic businessmen has become more than just another loan-word. The importance of this phenomenon for the Russian companies is understood by both the business owners initiating acceptance of the Corporate Behavior Code in the companies under their control, and university professor experienced in protection of multi-page dissertations, who is standing up for teaching 'Corporate governance' course. However, do they coincide in their understanding? Do they have uniform approaches to solving the basic problems of domestic corporate governance? And do these problems even exist? From the outside it may seem there are no reasons for worry. Is it truly so? Let us study the issue. We shall begin with the problem of controlling, major and minority shareholders interaction. Now the corporate governance system in Russia is actually standing still at the crossroads. On the one hand the large business representatives and top-managers of joint-stock companies with the state participation or the state corporations would like to direct the efforts of the legislators and judicial authorities to support the system with domination of controlling shareholders, on the other hand - the country leaders proclaim the policy of share market development and economy modernization, which is shown in innovative technologies development, on the third - the deep crisis that affected financial markets undermines many basic principles of the corporate law and governance. The large businesses and the state companies' motives are clear - the minority shareholders are perceived by them as a handicap to the current economic activities, stalling the realization of new ambitious projects on competitors' purchase or the achievement of the next large socially useful purpose. Shareholders' life shows that Russia has long ago become the country with the concentrated system of shareholding. In overwhelming majority of joint-stock companies the share of minority shareholders voices does not exceed 10%. And the remaining voices, as a rule, are not controlled by several, but by just one shareholder. By the way, this is the serious distinction of Russian joint-stock companies from the companies of the continental Europe often compared to them. As it is known, unlike the USA and Great Britain, the companies in Germany, Italy and France are controlled by a rather small number of shareholders. Such thing was named 'concentrated ownership' (concentrated possession/property). Unlike Russia, these jurisdictions hold on to the approach according to which the shareholder is considered controlling when he owns 20(twenty!)% of voices directly or indirectly. Among twenty leading companies in each of the above listed continental Europe countries a significant share is held by the companies having no controlling shareholder: France-60%, Germany-50%, Italy-20% (for comparison in the USA this parameter amounts to 80%, and in Great Britain the whole 100%). In comparison with these numbers it is difficult to refer to Russia as the country with the concentrated structure of shareholders capital, it would be more appropriate to use the term super-concentrated structure.