Wider das Paritätsprinzip! - Lektionen aus Grossbritannien [Against Inalienable Board Powers! - Lessons from the UK]

Citation:

Häusermann, Daniel M. 2014. “Wider das Paritätsprinzip! - Lektionen aus Grossbritannien [Against Inalienable Board Powers! - Lessons from the UK].” Schweizerische Zeitschrift für Wirtschafts- und Finanzmarktrecht (SZW) 86 (3): 255.

Abstract:

Under Swiss corporate law, the powers of the board of directors to oversee and manage the corporation are inalienable: It would be illegal for the articles of incorporation to require shareholder approval on issues pertaining to the board’s exclusive domain. Likewise, shareholders are prohibited from giving the board directions. A proposal by the Federal Council to relax this “inalienability rule” in a limited way has been met with mixed reactions.

British company law provides the setting for a natural experiment on what may happen when corporations are free to regulate the division of powers between the shareholders and the board. I analyzed the articles of association of 93 companies represented in the FTSE 100 and I found that in all of these companies, shareholders may give the board directions, sometimes even with a simple majority. 73 per cent of all companies restrict the board’s borrowing powers. Both would be illegal under Swiss law. In addition, companies with a premium listing—including all FTSE 100 companies—are required to obtain shareholder approval for important transactions. There is no evidence of problems relating to these rules.

Therefore, Switzerland’s “inalienability rule” should be abolished completely, not just in part, as the Federal Council has proposed. Common objections against loosening the rule are unconvincing. However, a couple of smaller statutory amendments will be necessary in the event that the “inalienability rule” is abolished.

Last updated on 08/14/2014