According to the EU High Level Group of Company Law Experts (HLG), pyramidal groups, dual class shares and other instruments used to deviate from proportionality between risk-bearing and control are a source of agency costs in that they increase the private benefits of control and conflicts of interest, and therefore may come at an expense for the non-controlling shareholders. The HLG position is important since it may influence future EU regulation. We argue that: a) the concepts of “agency costs” and “private benefits of control”, though partially overlapping, do not coincide, in that private benefits may not come at an expense for the non-controlling shareholders (i.e. private benefits may be either “good” or “bad”); b) while “bad” private benefits may be associated with weak protection of minority shareholders, no clear-cut relationship has been found between private benefits and firm ownership structure; therefore, a regulatory intervention on ownership structures is not necessary and may be harmful, both for existing shareholders and for society as a whole; c) pyramids, dual class shares etc. are mainly used to obtain a particular ownership structure, and are not associated with investor expropriation unless legal protection is weak; d) where “bad” private benefits are high, the State (and the EU) should not tinker with companies’ ownership structure, but rather improve investor protection.
|Numero di pagine||15|
|Rivista||International Journal of Disclosure and Governance|
|Stato di pubblicazione||Pubblicato - 2004|
- corporate governance
- ownership structure
- private benefits