OECD South Eastern Europe OECD South Eastern Europe Corporate Governance Corporate Governance Roundtable Roundtable Dr. Gregory F. Maassen Dr. Gregory F. Maassen USAID CG&CL Project USAID CG&CL Project
Jan 06, 2016
OECD South Eastern EuropeOECD South Eastern EuropeCorporate Governance Corporate Governance
RoundtableRoundtable
Dr. Gregory F. MaassenDr. Gregory F. MaassenUSAID CG&CL ProjectUSAID CG&CL Project
The Drafting CommitteeThe Drafting Committee
Established in May 2003Established in May 2003 4 EU Experts (directives)4 EU Experts (directives) 5 USAID Experts5 USAID Experts 7 Macedonian Experts7 Macedonian Experts 3 Ministries (justice, finance, 3 Ministries (justice, finance,
economy)economy) Canada, US, Netherlands, UK, Canada, US, Netherlands, UK,
Ireland, Germany, France and Ireland, Germany, France and MacedoniaMacedonia
8 Nationalities: 8 Approaches8 Nationalities: 8 Approaches
The Drafting CommitteeThe Drafting Committee
The Drafting CommitteeThe Drafting Committee
The Drafting AgendaThe Drafting Agenda
2004
D2
D1
April 2004
2003 Law
May 2003
1996, 2002, Draft Company Laws1996, 2002, Draft Company Laws X EU Directives and RegulationsX EU Directives and Regulations Winter ReportWinter Report EU Action PlanEU Action Plan EU RecommendationsEU Recommendations OECD 1999 – 2004 PrinciplesOECD 1999 – 2004 Principles OECD Transitional EconomiesOECD Transitional Economies OECD White Book OECD White Book Country Studies on Legal Country Studies on Legal
SystemsSystems Sarbanex-Oxley ActSarbanex-Oxley Act
Open ProcessOpen Process
2004
D2
D1
April 2004
2003 Law
May 2003
32
43
46
38
19
38
49
45
46
45
5581
109
45
2756
25
120
20
30
25
500
500
60025
25
25
27 Debates
Open Process (27 Debates)Open Process (27 Debates)
2004
D2
D1
April 2004
2003 Law
May 2003
DeliverablesDeliverables
2004
D2
D1
April 2004
2003 Law
May 2003
Legal TransplantationLegal TransplantationLegislatio
n
Anglo-Saxon ConceptsAnglo-Saxon Concepts The Absence of Charter The Absence of Charter
CapitalCapital Cumulative VotingCumulative Voting One-Tier Boards of One-Tier Boards of
DirectorsDirectors Business Judgment RuleBusiness Judgment Rule Self-RegulationSelf-Regulation
Cumulative VotingCumulative VotingLegislatio
n
Multiply number of votes Multiply number of votes with number of candidateswith number of candidates
Directors with most votes Directors with most votes are electedare elected
Cumulative VotingCumulative VotingLegislatio
n
9 members must be elected9 members must be elected 2,500 shareholders own 20 2,500 shareholders own 20
percent of the outstanding percent of the outstanding shares with voting rights shares with voting rights
1shareholder owns 80 percent of 1shareholder owns 80 percent of outstanding shares with voting outstanding shares with voting rights rights
Total outstanding shares:15,000Total outstanding shares:15,000
How Would This Work?How Would This Work?
Cumulative VotingCumulative Voting
Where D = the number of directors to be elected, S = number of outstanding voting shares and n = the total number of directors
the minority shareholders want to elect (n = 1 director).
The minority shareholders need 1,501 shares or 13,509 votes to elect 1 candidate to the Board of Directors. They have 27,000
votes (3,000 shares* 9 directors) - enough to secure 1 candidate.
They need 27,009 votes to secure 2 candidates!
n S D + 1
+ 1 = 1 * 15,000 9+1
+ 1 = 1,501 shares
Cumulative VotingCumulative Voting
The Relationship Between the Number of Directors and the Effectiveness of Cumulative Voting
0
10
20
30
40
50
60
70
80
90
15 14 13 12 11 10 9 8 7 6 5 4 3 2 1
The Number of Directors in the Board of Directors
Th
e P
erce
nta
ge o
f V
otes
Nee
ded
by
Min
orit
y S
har
ehol
der
s to
Ele
ct D
irec
tors
(1
to 4
)
Number of directors in the Board ofDirectors
Votes needed secure the position of1 director
Votes needed secure the position of2 directors
Votes needed secure the position of3 directors
Votes needed secure the position of4 directors
Cumulative VotingCumulative VotingLegislatio
n
More Complex Than People ThinkMore Complex Than People Think Can They Mobilize Shareholders?Can They Mobilize Shareholders? Do They Understand the System?Do They Understand the System? Do They Want Large Boards?Do They Want Large Boards? Is One-Share One-Vote Not Better?Is One-Share One-Vote Not Better? How Effective Can One Director How Effective Can One Director
Representing Minority Representing Minority Shareholders Be?Shareholders Be?