The Role of Cumulative Voting in Protecting Minority Shareholders in Listed Companies

Objective: This article was produced due to the ongoing debate about the protection of minority shareholders in listed companies. It details the challenges faced by minority shareholders and sets out the various methods scholars have identified that can be used to protect minority shareholders. However, some lawmakers believe that cumulative voting is a substantial improvement in the methods commonly used to protect minority shareholders. The article considers what cumulative voting is, how it differs from straight voting rights and what benefits it provides, particularly for minority shareholders. Furthermore, the article considers the effectiveness of cumulative voting as a means of protecting minority shareholders from majority shareholders and delinquent boards of directors. Method: In writing this article, the authors compared the approach used in various countries to protect minority shareholders. They analysed the information gathered in a comparative study process to ascertain the international best practice relating to protecting minority shareholders and cumulative voting rights. At the end of this process, the article concludes with a review of the international best practices and how these may be applied in Kuwait. Result & Conclusion: After considering the theory behind cumulative voting and the application thereof, the conclusion reached is that cumulative voting does not adequately protect minority shareholders. Furthermore, the Kuwaiti legislature has not made cumulative voting mandatory and, as a result, few, if any, companies have adopted this method of voting.