Shareholder Rights Research Articles

MEDIATION: PRACTICE IN THE CORPORATE WORLD

The relationship between parties in corporate world is essential in order to addressing business disagreements. Where it is focusing on the language of business contract per se. Despite various dispute solutions and legal provisions on corporate, company and shareholder rights, all the parties concern are still facing some challenges. Mediation method is one of the alternative dispute resolutions for those who seeks justice without undergo the court proceeding. It is a swift and inexpensive form of dispute resolution. Mediator’s role is to facilitate the disputing parties, and utilizes both joint and private sessions to assist them to achieve consensus. In view of the economic interest, and with a vision to maintain their business relation, a private settlement is preferred between them. This study is using the doctrinal and comparative research methods. In which, this study is comparing the pertinent literature on jurisdiction of the court and Mediation Bodies in terms of Corporate / Company / Shareholders. The discoveries of this study are vital in describing the pros and cons of mediation practices and how it reflects justice to the Malaysian society.

Institutional Investors and Asset Managers’ Long-Term Engagement Under the SRD II: A Comparative Study Between Italy and the UK

When capital markets are affected by the illness of excessive short termism, shareholders (specifically, institutional ones) being inactive and seeking profit only, the consequences can be serious. Not only investee companies are forced to sacrifice their future horizons to appear more attractive, but also the overall investor society faces losses in terms of unachieved long-term values. Stewardship, fostering shareholder engagement, tries to re-equilibrate the relation between short and long termism in capital markets, through a series of initiatives that can be either based on soft law or hard law. In the EU context, after the promulgation of the Shareholder Rights Directive II, Member States started developing new rules for institutional investors and asset managers’ long-term engagement. The cases of Italy and the UK appear curious in this sense, since they are based on different mixtures of hard law and soft law rules. The comparison between the two possibly evidences how the choice for different legislative techniques can truly influence the results. The literal adoption of the Directive in Italy, although accompanied by promising soft law initiatives, represents a likely defeat of hard law, which appears not able to assimilate and ‘tame’ the core aspects of the discipline. Non-financial elements appear not fully valorized, and the material application of the rules too scholastic and uselessly complicated, as testified by the lack of clarity regarding exit (and entry) strategies, the ‘comply or explain principle, and the enforcement system. On the contrary, the approach followed by the UK policymaker, based on soft law mainly, shows a deeper understanding of stewardship and its role. It aims not to impose rigid obligations, but rather to leave market actors free to gradually and metabolize and adapt to the new engagement rules. Financial and non-financial elements appear equally contextualized, and all the applicative aspects mentioned above eventually find proper specification. Enforcement, then, is limited to a social sanctioning level, which again allows the market to – in a certain way – self regulate over time.

The Effect Of Corporate Governance On Corruption In Public Listed Companies In The Context Of Jordan

The OECD defined corporate governance as, enforce laws, rules and standards that define the relationship between company management on the one hand, shareholders, stakeholders or parties associated with the company on the other, and urge financial institutions to adopt those laws and standards in their systems to ensure universal classification, such laws and standards are called corporate governance. Some countries have adopted such standards, which are based on integrity and transparency, such as the Hashemite Kingdom of Jordan, but the apply these standards to protect the minority of shareholders in the joint stock companies are in conflict with certain legal provisions laid down by the Jordanian legislature in the companies Act. The Jordanian companies' law and some other financial laws have, of course, included a number of factors that encourage corporate governance, but on the other hand, we find texts that still impede the application of these standards and provide indicators that do not encourage the application of their standards and affect the rights of minority shareholders. The study will refer to the most important corporate governance criteria that balance the rights of the minority and majority shareholders with those that still need to be modified.

OWNERSHIP RELATIONS AS PRECONDITIONS FOR THE EMERGANCE OF LEGAL RELATIONSHIP IN JOINT-STOCK COMPANIES

The authors of the article have analyzed the understanding of ownership as a central entity and the main regulator of economic relations within a joint-stock company. It has been stated that ownership is associated with such categories as «property» and «right», which raises a considerable number of methodological issues originated by the formation of joint-stock companies’ ownership and shareholders rights in relation to the ownership. Particular attention has been paid to the fact that ownership in such a company as an economic category performs a certain function, which consists in the formation of a considerable amount of capital on the most profitable for all persons involved in this process, in order to its maximum profitable use. It has been noted that if we talk about the ownership of a joint-stock company, then it is formed by the issue of shares, and accordingly, the company, which is interested in attracting significant funds, conducts open placement, the proceeds of which are accumulated to use in its business activities. The authors have provided arguments in favor of other positive aspects of stock ownership that make it universal and capable of application wherever there is the need to accumulate significant amounts of funds and limit the scope of liability.
 It has been concluded that ownership in a joint-stock company as an economic category performs a certain function, which makes it not only an economic, but also a legal category. This function is to generate a large amount of capital in the most profitable terms for all persons involved in this process, for its maximum profitable use. The category of «stock ownership» is used when referring to the legal regime of ownership in a joint-stock company — the ownership rights of the shareholders for the shares and the ownership rights of the company for the property, which in their implementation intersect and affect one another.
 It has been supposed that the most appropriate model, to which stock ownership tends, is confidential property, ideology and practices of trusts. However, it is quite clear that its application in Ukraine in the present state of legal regulation is hardly worth supporting.

Public family firms and capital structure: A meta‐analysis

AbstractResearch Question/IssueIn this study, we examine the impact of family firm status on publicly listed firms' leverage ratios. Furthermore, we investigate the moderating role of a country's institutional setting, especially its shareholder and creditor rights, on this relationship.Research Findings/InsightsConducting a meta‐analysis on 869 effect sizes from 613 studies, we find an overall slightly negative but significant relationship between family firm status and leverage. Our results reveal a large amount of heterogeneity and considerable mean effect size differences across the 48 countries included in the study. The results of our meta‐regression analysis reveal significant moderating effects of shareholder and creditor rights on family firms' capital structure decisions. Whereas stronger shareholder rights have a positive impact on family firm leverage, stronger creditor rights have a negative impact.Theoretical/Academic ImplicationsOur study combines the two dominating and competing views on family firm leverage. On the one hand, the overall lower leverage ratio of family firms confirms the risk‐aversion view of family firms. On the other hand, control considerations also have a significant impact on leverage ratios, as family firms adjust their capital structure dependent on shareholder and creditor rights in their home country. Our study highlights the importance of the institutional setting on firms' financing patterns.Practitioner/Policy ImplicationsThe results suggest a significant impact of a country's institutional setting in general, and its strength on shareholder and creditor rights in particular, on family firms' capital structure decisions. Control considerations result in a strategic use of debt financing that ensures the owner family's dominant position in the firm and prevents potentially harmful conflicts with minority shareholders or creditors.

The Corporate Contract and the Internal Affairs Doctrine

In the landmark ruling Salzberg v. Sciabacucchi, the Delaware Supreme Court upheld the validity of a corporate charter provision restricting the rights of shareholders to bring federal securities law claims. Although rights arising under federal securities law lie beyond the internal affairs doctrine, which has traditionally defined the boundaries of state corporate law, the Salzberg court ruled that such rights may be regulated by the “corporate contract,” created by state corporate law and comprised of a corporation’s charter and bylaws. Embracing contractarian precepts, the Salzberg court thus rejected the lower Chancery Court’s concession theory of the corporate contract as inextricably bound by the internal affairs doctrine. Salzberg’s contractarianism has wide-ranging implications for the role of the internal affairs doctrine, the reach of the corporate contract, and the rights of shareholders arising under both state corporate law and federal securities law. For one, Salzberg suggests that the corporate contract may be used to impose all types of restrictions to deter shareholders from bringing federal securities class actions. Most significantly, the decision opens the path to using the corporate contract to compel bilateral arbitration for all shareholder claims. In this respect, Salzberg reflects a growing divergence in corporate law between a judicial rhetoric wedded to contractarianism and a statutory framework that still bears concessionary hallmarks of state power. Whether a mandatory arbitration provision set forth in a corporation’s governing documents is enforceable against shareholders will turn on how the Delaware legislature or the federal courts ultimately resolve this contract-concession tension.

LEGAL ASPECTS OF THE MANNERS OF HOLDING SHAREHOLDERS’ ASSEMBLIES IN THE CONDITIONS OF COVID 19 PANDEMIC

The functioning of the world social and economic order in the 21st century has faced many challenges, but the global Covid-19 pandemic has caused unpredictable tendencies that require immediate, effective and adequate reactions that will respond seriously to the new situation. No society, including Macedonia, has remained immune to the consequences caused by this pandemic, penetrating deeply into all segments of society. The Covid-19 pandemic directly raised the question of the readiness of national socio-economic orders to function in digital format. The functioning of the main carriers of economic fluctuation, i.e., business entities and their capacity for digitalization, is one of the main preoccupations imposed by the pandemic. These issues are current in global and Macedonian aspects. The main purpose of this paper is, through analysis of the practice of joint stock companies listed on the Macedonian Stock Exchange and those with special reporting obligations, to identify the degree of utilization of the opportunity provided in the Law on Trade Companies for organization at shareholders' assemblies by electronic means during the conditions of the pandemic. At the same time, the paper concentrates on the effects that the pandemic causes in the realization of the shareholder rights under the newly created conditions. In addition to analyzing the current situation, the paper provides guidance for improving the provisions for the organization of shareholders' assemblies by electronic means and the exercise of shareholders' rights. Keywords: Joint stock companies, shareholders’ assemblies by electronic means, shareholders' rights, COVID 19 pandemic

Auditor Liability and Excess Cash Holdings: Evidence from Audit Fees of Foreign Incorporated Firms

Auditors of foreign cross listed firms face liability arising from the nature of the institutional monitoring framework of legal claims that can potentially be brought against the auditor in both the home country and the US. This paper is the first to document the relationship between auditor liability and auditor pricing of excess cash holdings for foreign firms cross-listed in the US. Our findings indicate that auditors demand a fee premium for foreign incorporated clients with greater excess cash holdings, consistent with auditors recognizing the potential for legal exposure to agency conflict arising from foreign listed US traded clients. Furthermore, we examine aspects of foreign capital market protections, such as disclosure requirements, the strength of legal enforcement, and the strength of shareholder rights to better understand auditor perception of the liability they incur due to the agency costs associated with excess cash holdings. We find that there is a significant positive association between audit fees and excess cash holdings for firms where the country of incorporation permits greater liability of auditors in criminal and civil litigation. In addition, auditors assign higher audit fees to firms holding greater excess cash incorporated in countries with greater required accounting disclosure, stronger legal enforcement and stronger shareholder rights.

Appraisal Risk and Corporate Disclosure During Mergers and Acquisitions

I exploit a 2007 court ruling that significantly strengthens appraisal rights for shareholders of Delaware-incorporated target firms to examine how managers respond to appraisal risk during takeovers. Appraisal rights give target shareholders the right to receive a judge’s determined value for their shares in lieu of the acquirer’s offer. Target-firm disclosures play a critical role in the valuation decisions of judges; and valuation decisions pose a substantial risk to acquirers. I find that heightened appraisal risk induces target managers to withhold positive news arriving between the announcement and effective completion of the takeover. This observation is driven by target managers who are aligned with acquirers. I further document that acquirers benefit from this behavior in the form of a lower likelihood of appraisal and a higher likelihood of positive post-acquisition returns. Overall, my findings suggest that acquirer-target manager ties play an important role in facilitating the dilution of target shareholder property rights.

Topical issues of digitalization in corporate law

The purpose of the study is to analyze the provisions of the novelties of the Russian legislation on digital financial assets and digital currency. The methodological basis was the method of comparative legal analysis, using which the authors identify general patterns and features of the legal status of Russian digital joint-stock companies and decentralized autonomous organizations widely discussed in foreign literature. The results of the study were conclusions about the significant differences between the above organizations. A company issuing digital shares, under Russian law, differs from an ordinary non-public joint stock company by limiting the circulation of digital shares within the framework of a digital platform. Unlike the decentralized autonomous organization, it has legal entity and governing bodies. It was also concluded that there is a significantly greater variety of rights of holders of foreign token-shares in comparison with the rights of shareholders of Russian digital joint stock companies. The novelty of the research is contained in the results of the analysis and doctrinal interpretation of the norms of Russian federal laws concerning digital shares. So, in particular, it was established that such are recognized at the same time as securities and digital rights. Such a legal structure appears to be unnecessarily complex. According to Russian law, digital shares differ from ordinary shares in the form of certification of shareholders “rights, while no differences have been revealed in the scope of shareholders” rights.

Shareholder Democracy Under Autocracy: Voting Rights and Corporate Performance in Imperial Russia

This paper investigates how the rules that corporations wrote for themselves related to their financing and performance in an environment characterized by poor investor protections, Imperial Russia. We present new data on detailed governance provisions from Imperial Russian corporate charters, which we connect to a comprehensive panel database of corporate balance sheets from 1899to 1914. We document how variation in votes per share and other shareholder rights provisions were related to corporate choices of using debt vs. equity and whether these governance provisions correlated systematically with performance measures on the balance sheet and in terms of the market-to-book ratio. This investigation reveals the tradeoffs weighed by Imperial Russian corporations and demonstrates the surprising flexibility that Russian corporations enjoyed, conditional on obtaining a corporate charter.

Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights

Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights

Comment Letter of Professors Max M. Schanzenbach and Robert H. Sitkoff on the Department of Labor's Proposed Rulemaking on Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights

Comment Letter of Professors Max M. Schanzenbach and Robert H. Sitkoff on the Department of Labor's Proposed Rulemaking on Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights

Comment on Proposed Regulation: Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights

Comment on Proposed Regulation: Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights

Environmental, Social, and Governance Theory: Defusing a Major Threat to Shareholder Rights

In recent years environmental, social, and governance (ESG) theory has become increasingly influential in the world of corporate management and investing. Despite significant problems with inconsistent definitions and controversial policies, many proponents, including members of Congress and the Biden administration, are suggesting that ESG goals be mandated via government enforcement. Such mandates would constitute a major threat to the property, due process, and association rights of investors, but can be avoided if policy makers embrace a voluntary system of “benefit corporation” charters, augmented by private certification standards.

Kapitalmarktrechtliche Fragen der Vermögensverwaltung

This article first analyses the potential legal forms of asset management on a discretionary client-by-client basis (i.e. portfolio managers that act as the client’s agent and asset managers who are trustees) and the law applicable in Austria. Subsequently, the article explores the capital market conduct rules, which an asset manager specifically has to comply with, when investing on behalf of an investor (i.e. insider dealing, managers’ transactions and notifications of major holdings). Finally, questions are also raised by the newly introduced transparency requirements for asset managers due to the transposition of the Shareholder Rights Directive II into the Stock Exchange Act 2018.

MEDIATION: PRACTICE IN THE CORPORATE WORLD

The relationship between parties in corporate world is essential in order to addressing business disagreements. Where it is focusing on the language of business contract per se. Despite various dispute solutions and legal provisions on corporate, company and shareholder rights, all the parties concern are still facing some challenges. Mediation method is one of the alternative dispute resolutions for those who seeks justice without undergo the court proceeding. It is a swift and inexpensive form of dispute resolution. Mediator’s role is to facilitate the disputing parties, and utilizes both joint and private sessions to assist them to achieve consensus. In view of the economic interest, and with a vision to maintain their business relation, a private settlement is preferred between them. This study is using the doctrinal and comparative research methods. In which, this study is comparing the pertinent literature on jurisdiction of the court and Mediation Bodies in terms of Corporate / Company / Shareholders. The discoveries of this study are vital in describing the pros and cons of mediation practices and how it reflects justice to the Malaysian society.

Has European Corporatism Delivered? A Survey with Preliminary Evidence

The modern stakeholder movement in the U.S. is arguably an attempt to import European corporatism into U.S. corporate practice and public policy. Hence, it is useful to ask (i) do European firms really invest in stakeholder welfare; and (ii) are such investments accomplished at the cost of lower shareholder rights or shareholder value? I survey ESG (environmental, social and governance) related legislative developments in Europe and the related academic literature to hypothesize that better E&S disclosure records in Europe do not compensate for the valuation discount imposed by weaker Gs. I go on to provide preliminary evidence on this hypothesis by focusing on largest 50 public firms in four key European countries (Netherlands, France, Germany and the United Kingdom) matched by industry and market capitalization to a sample of comparable U.S. public firms. These top 50 European firms account for between 72% and 99% of the equity market capitalizations of all domestically incorporated equities in their respective countries. The valuation discount between continental European firms and U.S. firms in Tobin’s Q is correlated with presence of large block holders in European firms. The poorer disclosure record of U.S. firms on the environmental (E) and social (“S”) dimensions of labor is not correlated with this valuation discount. When U.S. firms do disclose E and S information, their track record is no worse than their European counterparts. My data tentatively suggest that poorer G in continental Europe destroys more shareholder value than potentially better E and S disclosure can add.

Comment Letter to the DOL: Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights (RIN 1210-AC03)

Comment Letter to the DOL: Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights (RIN 1210-AC03)

Does managerial entrenchment affect audit report lag?

We examine the association between audit report lag (ARL) and managerial entrenchment using data spanning 2008-2016. We use regression analysis and data obtained from publicly available sources to construct our sample consisting of 5,155 firm-year observations and 807 unique firms to investigate whether the behavior of entrenched managers influences the time it takes auditors to complete an audit. The length of the annual audit is the most critical determinant of the timeliness and relevance of the financial reports. Our proxy for managerial entrenchment is the entrenchment index (EINDEX) as constructed by Bebchuk, Cohen, and Farrell (2009). We find a negative relation between audit report lag and the entrenchment index. We stratify the entrenchment provisions in line with existing literature and find a negative association between the provisions that restrict shareholder rights and the provisions that discourage hostile takeovers. Overall, our findings suggest that management entrenchment curtails managerial opportunism and reduces the auditors’ efforts, and the time auditors spend to complete the audit.