Minority Shareholders: Useful Idiots, Free Riders or the Achilles Heel of the Corporate Idea?

The shareholder is the basis of the corporate idea and framework. Corporate governance protects the rights of shareholders. But not all shareholders have the same power, control or ability to exert their responsibilities and rights. The plethora of legal, regulatory and statutory frameworks and initiatives that are in place to establish a balance of power and control within and beyond the formal organizational pyramid, do not take into account the power and the complexity of relations, alliances and strategies among shareholders, shareholders and managers or shareholders and other stakeholders. Furthermore, main corporate governance theories more or less ignore minority shareholders. They are considered as free riders, useful idiots or just supplemental capital to achieve the goals of the more organized or more powerful shareholders or managers. Their position and bargaining depend on ownership concentration and legal protection. Ownership domination and control are the borderlines of the corporate governance problems especially in Continental Europe corporate governance system. In Continental Europe corporate governance system, the issues or problems that are reported for the Anglo-Saxon system are different: asymmetry of information vs asymmetry of power and control, moral hazard vs moral control, adverse selection vs family loyalty, differences in motives (alignment of interests vs control entrenchment). The paper will address these differences and will argue that best practices as an easy way to uphold pretenses and the “comply or explain” in these circumstances leads to non-compliance and no explanations. Finally, the paper will try to answer the question: Who wants to be a minority shareholder in a corporation that doesn’t respect the rights of the individual shareholder or it is dominated completely? The consequences of the fallout or failure of corporate governance in Continental Europe system countries will be shown using the Folli Follie case in Greece. As a conclusion the paper argues that a new framework of corporate governance is needed for countries where ownership concentration is high and legal protection of minority shareholders is poor.