Minority shareholder impediments primarily relate to the structure of the Companies Act, the current audit reporting format as well as the cost of any proceedings to protect or salvage the shareholders’ interest if they have been disadvantaged in any way.
The fairy tale of Robin Hood is well known. Robin Hood represents the underprivileged and disadvantaged (minority shareholders) in his fight against the evil and villainous sheriff of Nottingham (pervasive corporate management and executive directors).
Using his bow and arrows (the Companies Act), he defeats the sheriff and restores order and fair play to the land. They all live happily ever after.
Unfortunately, life rarely imitates art; fortunately, pervasive corporate management and executive directors appear to be few in relation to the many reputable ones.
This brought the recent buzzword of corporate governance to the fore. In reality, it is the diplomatic term for the prevention and containment of pervasive behaviour – which, in various forms, has become all too prevalent in our society today.
This places the minority shareholder at increasing risk of falling victim to the well publicized, as well as less public, corporate failings.
A component of corporate governance is the role and actions of the director.
A common misconception is that directors act in the interest of shareholders. Rather, they act in the best interest of the company.
Thus, if they make a decision that they purport to be in the best interest of the company and state that they acted on the advice of a professional such as an accountant or lawyer, it strengthens their indemnification.
The legal standing is strengthened regardless of the moral or ethical questions. Should the shareholders deem that they have been disadvantaged by this decision?
Their only option would be to sue themselves, since they would be suing the company that they as shareholders own. They would have to use straw (their personal resources) to fight brick and mortar (the company’s larger resources).
In the current environment it would be a waste of time and money to sue the lawyer or accountant for bad advice, or the directors who would have been indemnified. Their chances of a successful suit on bad advice would be slim to nil.
Kudos should be given to June Fowler for her foresight and conviction to galvanize the CLICO shareholder and beneficiary group.
An army of one does not have the same impact as a unified block of many.
It is my understanding that shareholders, comprising knowledgeable investors and representatives of investment companies, recently attended a meeting. Apparently they walked in with X per cent of shares and were advised that a financial arrangement had been agreed by the directors with a third party, so they were now X minus Y per cent shareholders in the company.
There was no vote or the like and the shareholders were left with no option other than, in Bajan parlance, “to tek de dun and guh ’long”.
Thus, if this calibre of knowledgeable individual or firm has no recourse, then the ordinary shareholder will have even less of a chance.
• Duane Burke is a certified public accountant and managing editor of Eco-Breeze Inc.
