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Shareholder interests are paramount.
A main purpose of corporate governance is to protect the interest of a company's owners - the shareholders. The OECD principles on corporate governance pay special attention to the rights of shareholders and their equitable treatment. Here is a summary:
- Basic shareholder's rights should include the right to secure ways of registering ownership, transfer shares, obtain timely and relevant information on the corporation, vote in general shareholder meetings, elect members of the board, and share in the profits. Shareholders should have the right to participate in, and be sufficiently informed on decisions concerning fundamental corporate changes such as amendments to the statutes, or articles of incorporation or similar governing documents, and extraordinary transactions that in effect result in the sale of the company.
- Shareholders should be informed of the rules, including voting procedures, that govern general shareholders' meetings. Shareholders should be given:
- sufficient and timely information about the date, location and agenda, as well as issues to be decided at the meeting;
- opportunity to ask questions of the board and to place items on the agenda of general meetings, subject to reasonable limitations;
- the right to vote in person or in abstentia with equal treatment of such votes.
- Capital structures and arrangements that enable certain shareholders to have a degree of control dis
proportionate to their equity shares should be disclosed.
- The rules and procedures concerning the acquisition of corporate control in captial markets, and extraordinary transactions such as mergers, and sales of substantial portions of shares, should be clearly articulated and disclosed so that investors clearly understand their rights and recourse. Transactions should occur at transparent prices and under fair conditions that protect the rights of all shareholders according to their class. Anti-take-over devices should not be used to shield management from accountability.
- Shareholders, including institutional investors, should carefully consider the costs and benefits of excercising their voting rights.
- All shareholders should receive equitable treatment, including minority and foreign shareholders and all shareholders should be able to obtain effective redress for violation of their rights. More specifically:
- shares of the same class should have the same vote,
- information on the voting right should be provided before the purchase of the share,
- any changes in voting rights should be subject to shareholder vote,
- custodians or nominees should cast votes as agreed upon with the beneficial owner of the shares,
- company procedures should not make it unduly difficult or expensive to cast votes,
- insider trading and abusive self dealing should be prohibited, and
- members of the board and managment should be required to disclose any material interest in transactions or matters affecting the corporation.
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