ASSIGNMENT FOR CORPORATE GOVERNANCE.docx

BACHELOR OF MANAGEMENT

MAY SEMESTER 2019

BBCG3103

CORPORATE GOVERNANCE

MATRICULATION NO

:

900319025773002

IDENTITY CARD NO.

:

900319025773

TELEPHONE NO.

:

0146955290

E-MAIL

:

[email protected]

LEARNING CENTRE

:

SRI RAMPAI

Table of Contents

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1.0 INTRODUCTION ON MINORITY SHAREHOLDERS

The term of minority shareholders is nothing new in a corporate and there is significant differences as compared to majority shareholders. In this assignment, the explaination of the characteristics of minority sharehoders in Malaysia will be given as well as the analysis on the challenges faced by minority shareholders based on the relevant evidences.

In the first section of assignment, the definition of minority shareholders and its history in Malaysia will be discussed. Basically, a minority shareholder is defined as a shareholder who does not exert control over a compan y. The majority shareholders almost always exert an absolute control over the company, its management, its board of directors, and so on. But there are many companies that are controlled by shareholders who own only 40  percent, 30 percent, 20 percent, or less of the shares, and whom however exert full control control over the company, as the remainder of the shares are scattered among a large number of shareholders, with every one of them having a minimal percentage being unable to gather a number of shares which is similar to those of the majority shareholders. In this event, all minority shareholders who are scattered, although together they could control even 80  percent of the shares, are defined as minority shareholders, as every one of them is a minority shareholder, and they cannot assemble enough votes to act as majority shareholders.

The definition of minority shareholders will be therefore shareholders who do not exert control over the board of directors of the companies, even if together they own the majority of shares, and the majority shareholders are defined as those who control the board of directors of companies, even if effectively they own much less than the majority of the shares. In other words, a minority shareholder can vote and have their perspectives heard,  but their votes are not enough to directly impact a company’s decision.

For example, imagine Seagate Enterprise is selling shares of its company. Ambrose, Ali, and Ang each own 10%, but Ahmad owns 60%. This would make Ambrose, Ali, Ali, and Ang all minority shareholders and Ahmad a majority shareholder. This would give give Ahmad

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much more control than the others have over Seagate Enterprises and their decisions as a company, such as operations, production, and even hirings and firings.

In the history of minority sharehoders in Malaysia, shareholders often resort to expressing their displeasure through a vote at a general meeting. The laws provide for avenues for shareholders to requisition the directors to hold such a meeting or for the shareholders themselves to hold the meeting. Often, the resolutions will be to allow the shareholders to nominate their own directors so that they have a greater say or to replace the Board entirely. But this route is predicated on having the numbers. There must be enough votes at the meeting to pass the necessary resolutions. Such attempts of holding a meeting may attract landmines along the way. Legal proceedings can delay the holding of the shareholder meeting as well as to challenge the resolutions. Such legal proceedings are expensive.

Secondly, media scrutiny in the financial press can shine the spotlight on any failures in corporate governance. There may then be market pressure through the impact on the share  price of the company.

Thirdly, there may be regulator investigation and enforcement against the directors if there have been failures in corporate governance or breaches of the law.

Further amendments to the law may be required to widen the possible remedies for aggrieved shareholders. In the Corporate Governance Blueprint 2011 by the Securities Commission Malaysia, two new options were considered.

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