OECD South Eastern Europe
Corporate Governance Roundtable
Dr. Gregory F. Maassen
USAID CG&CL Project
The Drafting Committee
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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
The Drafting Committee
The Drafting Committee
The Drafting Agenda
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May 2003
2003 Law
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D1
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D2
2004
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April 2004
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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
Open Process
27 Debates
19
30
109
25
81
May 2003
2003 Law
45
25
49
43
32
120
55
45
38
46
45
D1
38
D2
2004
April 2004
500
25
500
25
600
20
25
46
56
27
Open Process (27 Debates)
May 2003
2003 Law
D1
D2
2004
April 2004
Deliverables
May 2003
2003 Law
D1
D2
2004
April 2004
Legal Transplantation
Legislation
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Anglo-Saxon Concepts
The Absence of Charter Capital
Cumulative Voting
One-Tier Boards of Directors
Business Judgment Rule
Self-Regulation
Cumulative Voting
Legislation
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Multiply number of votes with
number of candidates
Directors with most votes are elected
Cumulative Voting
Legislation
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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
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How Would This Work?
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Cumulative Voting
nS +1=
D+1
1 * 15,000 + 1 = 1,501 shares
9+1
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!
Cumulative Voting
The Relationship Between the Number of Directors and the Effectiveness of
Cumulative Voting
90
The Percentage of Votes Needed by Minority
Shareholders to Elect Directors (1 to 4)
80
70
Number of directors in the Board of
Directors
60
Votes needed secure the position of
1 director
50
Votes needed secure the position of
2 directors
40
Votes needed secure the position of
3 directors
30
Votes needed secure the position of
4 directors
20
10
0
15 14 13 12 11 10 9
8
7
6
5
4
3
The Number of Directors in the Board of Directors
2
1
Cumulative Voting
Legislation
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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?