Abstract

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Keywords:: board of directors; independent director; corporate governance; anti-takeover

Abstract:: It is a new phenomenon that a director or the board of directors take actions to monitor and check an outside shareholder. The actions include the direct criticism of an outside shareholder, adopting or proposing anti-takeover measures. The basic function the board of directors should perform is to monitor and check the corporate controller(the controlling shareholder or the management), and the independent directors are expected to enhance such a monitoring function. The board of directors may monitor any persons including outside shareholders, but such monitoring should not deviate from its major function of monitoring the controller and should conform to following three conditions: being beneficial for corporate interest; being neutral and not biased for the controller; avoidance of self-interest of the board. An individual director should also conform to these conditions and join the board discussion to engage in the monitoring, instead of acting by himself. When the board is discussing how to monitor an outside shareholder, they should employ more prudential and stricter standard as the issue raised is more significant, involves severer neutrality or conflict of interest problems.