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OECD South Eastern Europe Corporate Governance Roundtable Dr. Gregory F. Maassen

OECD South Eastern Europe Corporate Governance Roundtable Dr. Gregory F. Maassen USAID CG&CL Project. The Drafting Committee. Established in May 2003 4 EU Experts (directives) 5 USAID Experts 7 Macedonian Experts 3 Ministries (justice, finance, economy)

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OECD South Eastern Europe Corporate Governance Roundtable Dr. Gregory F. Maassen

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  1. OECD South Eastern Europe Corporate Governance Roundtable Dr. Gregory F. Maassen USAID CG&CL Project

  2. The Drafting Committee • Established in May 2003 • 4 EU Experts (directives) • 5 USAID Experts • 7 Macedonian Experts • 3 Ministries (justice, finance, economy) • Canada, US, Netherlands, UK, Ireland, Germany, France and Macedonia • 8 Nationalities: 8 Approaches

  3. The Drafting Committee

  4. The Drafting Committee

  5. The Drafting Agenda 2003 Law May 2003 D2 D1 April 2004 2004 • 1996, 2002, Draft Company Laws • X EU Directives and Regulations • Winter Report • EU Action Plan • EU Recommendations • OECD 1999 – 2004 Principles • OECD Transitional Economies • OECD White Book • Country Studies on Legal Systems • Sarbanex-Oxley Act

  6. Open Process 27 Debates 2003 Law May 2003 45 25 30 19 45 109 55 25 81 D2 D1 38 46 49 120 43 32 45 April 2004 2004 38 500 25 25 600 500 20 25 46 56 27

  7. Open Process (27 Debates) 2003 Law May 2003 D2 D1 April 2004 2004

  8. Deliverables 2003 Law May 2003 D2 D1 April 2004 2004

  9. Legal Transplantation Legislation • Anglo-Saxon Concepts • The Absence of Charter Capital • Cumulative Voting • One-Tier Boards of Directors • Business Judgment Rule • Self-Regulation

  10. Cumulative Voting Legislation • Multiply number of votes with number of candidates • Directors with most votes are elected

  11. Cumulative Voting Legislation • 9 members must be elected • 2,500 shareholders own 20 percent of the outstanding shares with voting rights • 1shareholder owns 80 percent of outstanding shares with voting rights • Total outstanding shares:15,000 • How Would This Work?

  12. Cumulative Voting nS D + 1 1 * 15,000 9+1 + 1 = + 1 = 1,501 shares Where D = the number of directors to be elected, S = number of outstanding voting shares and n = the total number of directors the minority shareholders want to elect (n = 1 director). The minority shareholders need 1,501 shares or 13,509 votes to elect 1 candidate to the Board of Directors. They have 27,000 votes (3,000 shares* 9 directors) - enough to secure 1 candidate. They need 27,009 votes to secure 2 candidates!

  13. Cumulative Voting

  14. Cumulative Voting Legislation • More Complex Than People Think • Can They Mobilize Shareholders? • Do They Understand the System? • Do They Want Large Boards? • Is One-Share One-Vote Not Better? • How Effective Can One Director Representing Minority Shareholders Be?

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