Last updated: 01.22.2024
Treatment of Minority Shareholders

Protecting minority shareholders from concentrated ownership or conflicts of interest with controlling shareholders is a requirement of well-functioning markets. This includes equal voting rights and access to information for the same class of shares, and policies and practices to deal with minority shareholder interests in material transactions that may affect their rights. 

Reporting Elements for the Treatment of Minority Shareholders

Ownership and Control: provide details on who owns the company, controlling shareholders, who can exert influence directly or indirectly, and where relevant, the ultimate beneficial owners.


Compensation: describe the company policy on compensation, actual compensation for key executives, and shareholders’ role in approving compensation, pay-for-performance plan and links to sustainability. 


Rights of Minority Shareholders: describe voting, board nomination, and other rights of minority shareholders, including for change of control and related-party transactions (RPTs). 


Related-Party Transactions: describe management systems for RPTs. Provide details on RPTs (party, amount, and type) and additional details for significant transactions (terms and third-party opinion).

Ownership and Control

The report should give a clear view of who owns the company, including those who own or can exert influence directly or indirectly.

Significant Direct Shareholders (or Ultimate Beneficial Owners)

The report should list significant shareholders (or ultimate beneficial owners, typically more than 5 percent of shares held directly or indirectly), the percentage held, and the percent of voting rights. This should also include share options, pledged shares, and other securities arrangements. It should also note when significant shareholders are management or board members.

Indirect or Deemed Ownership

Disclosure on ownership and control should also include arrangements that provide indirect control or deemed ownership, including:

  • Shareholder agreements to vote shares in line with those of a substantial shareholder;
  • Special voting rights;
  • Multi-voting shares and the voting rights they grant to major shareholders;
  • Control-enhancing or antitakeover mechanisms, such as voting caps and poison pills;
  • Special shareholder rights (golden shares) to block certain major decisions or to appoint one or more board members directly (common in state-owned enterprises).

Groups and Control Chains

The report should indicate whether the company is part of a group and if so, how it fits into the group structure. It should also disclose the various intermediaries, if any, through which a controlling shareholder holds control.

Controlling Shareholders

The report describes the identity of controlling shareholders (individual, family, or group), how many shares they control, and how control is held. It also addresses the controlling shareholders’ role or roles (for example, founders, providers of capital, and management).

Succession: controlled companies should disclose their succession policy as it relates to controlling shareholders (through inheritance or a family governance body, or through policies of corporate group or state-owned companies).

Examples of Reporting
Rights of Minority Shareholders
Board Nomination and Other Minority Shareholder Rights

The report should include information on mechanisms that allow minority shareholders to nominate members of the board and vote on certain matters, including:

  • Cumulative voting: a shareholder can cast all its votes for a single board nominee;
  • Block voting: a large number of shareholders vote their shares in a single block;
  • Super majority: certain transactions require approval by a large majority of shareholders;
  • Majority of minority: certain transactions require approval from the majority of minority shareholders.

The report should also clarify the rights attached to various types of shares and whether the rights were exercised.

Change of Control

The report should describe company policy on the treatment of minority shareholders in case of a change of control. This includes tag-along rights, which require the buyer to offer to purchase the shares of minority shareholders or meet other requirements.

Examples of Reporting
Compensation Policy

The report describes the company’s policy on executive compensation and, when applicable, details on pay-for-performance plans, including the areas of performance (financial, operational, sustainability) and whether compensation is delayed or conditional or subject to claw back (recovery of money already disbursed). 

The report describes the process to establish the compensation policy and the role of the board (or specialized committee) and shareholders in reviewing and approving executive compensation. It also discloses any discretion used in setting actual compensation. With the volume of pending legislation and increased reporting demands, companies are starting to link compensation programs to ESG targets.

Actual Compensation

The report contains actual compensation data in tabular form for each board member, the chief executive officer, and other key executives. The table should include the following:

  • Salary;
  • Cash bonuses;
  • Stock and stock-based awards;
  • Pension accrual;
  • Other monetary and in-kind benefits.

Delayed compensation (share-based, for example) should be accounted for when granted, noting when the award vests. Conditional compensation (based on future conditions) is not included in compensation totals, but it should be indicated in the supporting information.

To guide companies in developing sustainable compensation programs, the Harvard Business Review provides five practical questions:
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  • What does the organization aim to achieve with its compensation plan? How do these objectives link to the corporation’s purpose and strategy?

  • Next, organizations should determine which ESG metrics matter and which don’t. For example, reduction of greenhouse gas emissions is positive and is possibly on everyone’s agenda. But if you’re in the financial services industry, reduction of greenhouse gas emissions of your own premises will have a limited impact, whereas reduction of emissions related to your investment and/or loan portfolios would be more impactful. Such materiality is a key issue for the relation between ESG and business performance.

  • Once materiality is assessed, it’s important to determine priorities, or the weighting, of incentive plan metrics to drive the right behaviors. To make an impact, compensation plans need to be tied to clear key performance indicators and be financially meaningful to participants.

  • For incentivization purposes, sustainability key performance indicators must be measurable and typically set with reference to external standards or international treaties (like the Paris Agreement). As regulations and standards continue to evolve, so too will the ESG metrics that are selected. Boards therefore need to make sure that they measure what matters and allow for discretionary adjustments where needed.

  • With ESG metrics in place to incentivize executive focus, disciplined disclosure practices play a vital role in providing visibility on the progress being made. Compensation-linked targets should be auditable and be disclosed following, where possible, the existing disclosure standards.

    Source: Martha Cook, Katherine Savage, and Frederic Barge. 2023. “Linking Executive Pay to Sustainability Goals.” Harvard Business Review, February 7, 2023.

Examples of Reporting
Related Party Transactions
Policy and Management Process

The report should describe the company’s oversight and management systems for RPTs, including:

  • Policy on RPTs;
  • How potential RPTs are identified and vetted;
  • How RPTs are approved, including the role of the board (and committees) and shareholders and whether different transactions have different approval procedures;
  • How to manage a situation in which a board member is conflicted or has conflicts of interest resulting from RPTs;
  • Third-party evaluations.
Details on RPTs

For all material RPTs concluded or contemplated during the past year, the report should disclose the following information:

  • Name of the party and how it is related (parent, subsidiary, associate, joint venture, management);
  • Amount and type of the transaction (sale of goods, services, loan);
  • Any outstanding balances, contingencies, or bad debts related to the transaction.

For significant transactions, it might be useful to include additional details:

  • Terms of the transaction (interest rate, cost, length of services);
  • Reasonableness (market benchmarks, transaction process such as competitive tender);
  • Third-party evaluation of the transaction.
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  • According to International Accounting Standard 24, a related-party transaction is “a transfer of resources, services, or obligations between a reporting entity and a related party, regardless of whether a price is charged”.

    Examples include the following:

    • Sale, purchase of goods or materials
    • Sale or purchase of property or assets
    • Lease of property or assets 
    • Provision or receipt of services
    • Transfer of intangible items (research and development, trademarks, license)
    • Provision, receipt, or guarantee of financial services (loans, deposit)
  • A related party is a person or an entity that is related to the reporting entity. 

    Examples include the following:

    • A board member, senior executive, controlling shareholder, or their immediate family members (parents, siblings, uncles, aunts, in-laws, cousins, and stepchildren)
    • Another company linked by ownership or investment, including joint venture
    • A company pension plan or entity linked to the company pension plan
    • A company where a board member or senior executive has joint control or significant influence.
Examples of Reporting