Minority Shareholders

Minority shareholders are shareholders of a corporation who own less than 50% of the voting rights and who individually are unable to control the corporation. Minority shareholder status is related to the proportion of voting power held by a shareholder, not by the proportion of shares held: Some share classes may have no or limited or multiple voting rights.

The key ethical issue is that, because they are in the minority, they have an ineffective voice in corporate governance and those in the majority may operate the firm for the majority’s advantage and to the unfair detriment of the minority. This acts as a disincentive for small shareholders to invest in equity markets. Minority shareholders themselves may also act unethically by acting as free riders—that is, ...