THE SHAREHOLDER DERIVATIVE SUITS: DISFUNCTION AND REMEDIES AGAINST A "PARADOXAL" INACTIVITY

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Dario Latella ORCID logo

https://doi.org/10.22495/cocv7i4c2p5

Abstract

The derivative action exerted by shareholders (rectius, by a single shareholder or by a minority of them) falls within the wider topic of the defence of shareholder minorities. Considered as one of the pillars of corporate governance, the above-mentioned subject tends to be a control tool as to the accurate execution of the managerial task. Some empirical studies show that, in spite of corporate fraud by managers, in listed companies there are no such lawsuits. This “physiological paradox” – under which the others’ indifference enables a few organised individuals to control the company – has urged the need for a deep re-examination of control power over management. According to the European Directive on the Cross-border Exercise of Shareholders’ Rights, effective shareholder control is a prerequisite to sound corporate governance and should, therefore, be facilitated and encouraged. But control power over management is usually based on “empty” procedures and frequently false meeting practices. The fundamental “hypocrisy” of corporate governance is due to different quality and quantity of information available for deeply different groups of people. From this point of view, the European Directive makes it easier to exercise some traditional rights, but still does not give a “full” right to be informed about management.

Keywords: Corporate Governance, Shareholders, Management

How to cite this paper: Latella, D. (2010). The shareholder derivative suits: disfunction and remedies against a "paradoxal" inactivity. Corporate Ownership & Control, 7(4-2), 297-302. https://doi.org/10.22495/cocv7i4c2p5