Tug Of War Between Majority-Minority

BALANCING THE UN-BALANCED

"The Majority is always wrong and the minority is rarely right"

-Henrick Ibsen

Corporate law is the yardstick for the business sector which chaperons and molds the behavior of a Company. Corporate Law establishes the structure of the corporate form as well as formulates rules for the smooth flow of operations in the company.The other vital function of corporate law is to control the conflict of interests amongst the corporate constituencies such as the shareholders, directors, creditors etc. These conflicts are referred to as the 'Agency Problems where the wellbeing of one party, depends on the actions of another party. Title 8, Chapter 1 of the Delaware General Corporation Law (the Delaware Code) is the statute governing corporate law in the U.S. state of Delaware.The Delaware General Corporation Law has been a vital authority in the United States corporate law since the early 20th century. In the USA, every state has their own corporate governance law, however, since Delaware has a more developed and flexible approach to corporate law that provides greater guidance and transaction liability issues, most larger corporation choose Delaware General Corporation Law.

The typical corporate governance framework views shareholders as the principal, and the objective of the management of a corporation is to maximize the interests of the shareholders. Even though shareholders delegate the board of directors to guide and monitor the management, they are given privileges and opportunities to participate directly in monitoring and operating their firms.

Categorically, we can outlook four (4) main agency problems in a company on which the Law has paid utmost attention, as follows:

Shareholders v. Managers Controlling Shareholders v. Minority Shareholders Shareholders v. Non-Shareholder Constituencies Shareholders v. Bondholders. Tug of War between Majority-Minority

A key agency problem that exists in any corporation is the struggle between the minority shareholders (the principal) and the majority shareholders (the agents). This is a high occurrence issue in jurisdictions where the concentrated shareholding dominates. It is an evident fact that the majority shareholders have more control over the governance of the company and therefore it holds an advantageous position for the minority shareholders.Protecting minority shareholders dates back to 1970s in the USA. The states rely on its underlying concept of democracy in every aspect, starting from the government to the corporate governance in companies. They believe that it is vital to protect the rights of all individuals. Therefore, it is important that majorities keep minorities in their mind when they make decisions that affect everyone in corporations. The nature of shareholders and their share structure in the USA in public holding companies differ from other jurisdictions. Investment institutions own most of the shares in...

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