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Derivative Actions and Corporate Governance$
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Arad Reisberg

Print publication date: 2007

Print ISBN-13: 9780199204892

Published to Oxford Scholarship Online: January 2009

DOI: 10.1093/acprof:oso/9780199204892.001.0001

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Shareholder Litigation and Corporate Governance

Shareholder Litigation and Corporate Governance

Chapter:
(p.17) 1 Shareholder Litigation and Corporate Governance
Source:
Derivative Actions and Corporate Governance
Author(s):

Arad Reisberg

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199204892.003.0002

This chapter is concerned with an indefinite but fundamental: what purpose lies at the heart of the company's cause of action which justifies the use of derivative actions? Section 1.2 firstly identifies the limitations of the traditional view of the derivative action. Subsequently it explicates the relation between the derivative action and two concepts, namely ‘control’ and ‘agency costs’. Section 1.3 outlines some major techniques of accountability, which share the goal of reducing agency costs. Section 1.4 focuses on one such major alternative as it examines whether it is true that the market for corporate control may constitute an effective functional substitute for litigation. As will be seen, from a governance perspective (as opposed to a narrowly legal one), the interaction of the derivative action with the market for corporate control raises some interesting issues.

Keywords:   control, agency, agency costs, accountability, objectives, market for corporate control

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