This chapter examines legal issues concerning majority control and minority protection in firms with concentrated ownership governance structures, with particular emphasis on the tradeoff between the goals of protecting minority shareholders and allowing controllers to pursue their vision and how corporate law should balance these conflicting goals. Focusing primarily on Delaware corporate law, it suggests that holding a control block allows majority shareholders to pursue their idiosyncratic vision in the manner they see fit, even against minority investors’ objections. Idiosyncratic vision refers to the subjective value that entrepreneurs attach to their business idea or vision, and this chapter considers its role in the value of control. It also discusses the perils of asymmetric information and differences of opinion, as well as the risk of agency costs for minority investors.
Business Organizations Law | Commercial Law | Law
Zohar Goshen & Assaf Hamdani,
Majority Control and Minority Protection,
The Oxford Handbook of Corporate Law and Governance, Jeffrey N. Gordon & Wolf-Georg Ringe (Eds.), Oxford University Press
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/4299