The Exercise Of Corporate Control And Protection Of Small Shareholders

The production of the company control has the legitimacy of its interests. Corporate control as a kind of "scarce resource" exists in the corporate governance, whose interests include own interests and derivative interests. Moreover, the internal conflict of these interests is the root cause of the competition for corporate control. Controlling shareholders will account for an absolute superiority during the fighting for the corporate control with other minority shareholders, since they holds the majority of information, capital and other resources. It will result in abnormal distribution of the company interests, which seriously damaged the interests of small shareholders without scientific and rational regulation mechanism, which is an improper exercise of corporate control. On the contrary, if the corporate control can be exercised properly, then the controlling shareholder and minority shareholders will benefit both. Actually, corporate control exercise of legitimate and illegitimate means to exercise on behalf of two states:the former refers to corporate control of "Pareto optimal" allocation of state and the latter refers to any other distribution which is not in "Pareto optimal" state. In other words, corporate control has been exercised legitimatly if and only if the allocation of corporate control achieves the "Pareto optimal". Or in addition to any other distribution of state, the company control was exercised improperly. It helps to optimize the configuration of control mechanisms with scarce resources as the standard in corporate governance structure configuration control, so as to allocate corporate control efficiently between the controlling shareholder and minority shareholders, which is "Pareto optimal" allocation state——the interests of the controlling shareholders and minority shareholders maximize both at the same time, without reducing the interests of either other side. This article aims to explore the theoretical possibility of existence of "Pareto optimal" allocation state and its evaluation criterias, finally makes a number of solutionsfor the current practice of our country.