The Best Interests of the Corporation, Procedural Questions of Enforcing Individual and Corporate Rights and Legal Actions against Board Members

Abstract

This paper examines the procedure by which individual and corporate rights are enforced to protect the best interests of the corporation. The crucial question of just what the best interests of the corporation are, is focussed on particularly. The unique German approach of the 'best interests of the enterprise' is contrasted with the 'best interests of the corporation'. The different treatment given to the 'best interests of the corporation' and the 'best interests of the enterprise' by various German laws are used to illuminate the tensions between stakeholder and shareholder interests. It is pointed out that in fact, members of management boards and members of supervisory boards must take into consideration the interests of all stakeholders as part of the 'best interests of the enterprise'. Recent developments regarding causes of action for minority shareholders under German law are explained in greater detail. These developments are analysed for the potential and actual influence on the protection in Germany of the interests of corporations and minority shareholder interests. It is also considered how the German statutory provisions compare with the rules in the US, particularly with regards to statutory derivative actions. The importance of cultural norms on questions of corporate best interests is also discussed. It is concluded that under the German statutory derivative action it is still difficult for shareholders, particularly minority shareholders, to enforce the corporation's best interests.