Communication is key when shareholders clash over majority- minority interests

WHEN framing corporate governance rules and regulations, the presumption is that protection of minority interests is of paramount importance because majority power, if unchecked, can be abused to the detriment of small shareholders and the company.

Corporate assets for example, can be sold off at reduced prices to related parties or even bought from related parties at inflated prices, money can be diverted to benefit controlling individuals and dividends can be cut while executive pay is raised.

Furthermore, there is ample research to show that small investor protection is essential in allowing companies to raise the capital needed to grow, innovate, diversify and compete, and that economies which have dynamic capital markets are those which tend to have strong investor protection arrangements in place. For these reasons, governance regulations demand a high degree of board independence and integrity to ensure proper managerial oversight, and maximum transparency in disclosures so the playing field is as level as possible. There is also growing awareness of giving minorities greater say when it comes to important issues - for example, in companies which have dual class share structures…