This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information.

What is Measured?

TABLE 1 - WHAT DO THE PROTECTING MINORITY INVESTORS INDICATORS MEASURE?

Doing Business measures the protection of minority investors from conflicts of interest through one set of indicators and shareholders’ rights in corporate gover­nance through another (table 1). The data come from a question­naire administered to corporate and securities lawyers and are based on securities regulations, company laws, civil procedure codes and court rules of evidence. The ranking of economies on the strength of minority investor protec­tions is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index.

FIGURE 1 - HOW WELL ARE MINORITY SHAREHOLDERS PROTECTED FROM CONFLICTS OF INTEREST?

PROTECTION OF SHAREHOLDERS FROM CONFLICTS OF INTEREST

The extent of conflict of interest regula­tion index measures the protection of shareholders against directors’ misuse of corporate assets for personal gain by distinguishing three dimensions of regulation that address conflicts of interest: transparency of related-party transactions (extent of disclosure index), shareholders’ ability to sue and hold directors liable for self-dealing (extent of director liability index) and access to evidence and allocation of legal expenses in shareholder litiga­tion (ease of shareholder suits index). To make the data comparable across economies, several assumptions about the business and the transaction are used (figure 1).

SHAREHOLDERS' RIGHTS IN CORPORATE GOVERNANCE

The extent of shareholder governance index measures shareholders’ rights in corporate governance by distinguishing three dimensions of good gover­nance: shareholders’ rights and role in major corporate decisions (extent of shareholder rights index), governance safeguards protecting shareholders from undue board control and entrenchment (extent of ownership and control index) and transparency on ownership stakes, compensation, audits and financial pros­pects (extent of corporate transparency index). The index also measures whether a subset of relevant rights and safeguards are available in limited companies.

See the methodology for more information.