Corporate Governance and Minority Rights

Anglo-American corporate law has developed on the premise that ordinarily the majority is entitled to rule. Nevertheless, the courts have recognized the dangers in permitting tyranny by the majority and have given relief in cases where they believed the majority was clearly abusing its powers. Courts have had little difficulty in doing this where it was clear that the majority was practising fraud in the sense that it was appropriating to itself property or benefits which, in the view of the courts, belonged to the corporation or, as it was sometimes put, to the body of shareholders as a whole. However, the courts have had much greater difficulty in dealing with cases where the majority was not committing a "fraud", but, rather, was causing the company to pursue a course of action because of interests extraneous to their position as shareholders. So far, our courts have failed to develop a coherent set of principles which may be applied to determine when the power of the majority should be restrained in such circumstances, and the result is that it is very difficult to predict what limitations courts will place on the power of majorities.