Resolving agency costs in United Kingdom private companies

KD England and Wales;KDC Scotland

Hardman, Jonathan C. ; MacNeil, Iain

University:University of Glasgow

Department:School of Law

关键词: Company Law, private companies, agency costs, minority shareholders.;   

Others  :  http://theses.gla.ac.uk/81264/7/2020HardmanPhDc.pdf

来源: University of Glasgow

【 摘 要 】

In companies, agency cost analysis generally focuses on agency costs arising between owners and managers. The purpose of this thesis is to offer an holistic theoretical overview of different types of agency costs and externalities which arise in different types of business organisations and the legal responses to them. From this analysis, it emerges that high agency costs (directly and indirectly manifested) and externalities are, in the main, mitigated by mandatory rules. There is one exception to this: indirect manifestations of majority/minority agency costs (that is, agency costs which are transmitted through directors) are not mitigated. Worse, they are actively exacerbated by what are referred to in this thesis as ‘twin exacerbations’: the ability of the shareholders (by majority rule) to assume powers of the company; and their ability (by majority rule) to remove directors. This thesis undertakes historical, comparative, doctrinal, and empirical research into these twin exacerbations. A general historical overview confirms the theoretical proposition of this thesis: that, historically, mandatory rules have been used to resolve the main examples of agency costs/externalities in company law. Applying historical analysis to the twin exacerbations, it is argued that the first occurred by accident, while the second does not adequately resolve the wrong it is designed to. Comparatively, different jurisdictions have attempted to resolve equivalent problems, and while Delaware resolves them it does so in a way which makes being a shareholder in a Delaware company differ fundamentally from being a shareholder in a UK company.Doctrinally, other areas of company law do not act to mitigate the twin exacerbations: directors' duties are neutralised; shareholders owe no duties to each other when voting; minority protection is weak; and soft law does not work for private companies. Empirically, this thesis undertakes a leximetric study to establish whether the 'market' resolves the twin exacerbations. If we establish that it does not, and may not be able to, legislative reform becomes inevitable. By resolving the twin exacerbations, we align the law regarding indirect manifestations of majority/minority agency costs with the general proposition established for company law: rules in business organisations should operate by default, unless an agency cost/externality arises, in which case mandatory (or, where there are public markets, ‘comply-or-explain’) rules should apply. This reform resolves the theoretical, historical, comparative, doctrinal, and empirical issues highlighted in this thesis.