This criterion is mainly measuring what a shareholder can do if the directors would rather work in their own interest than in the interest of the company. Considered is a
case of self-dealing. (The standard case study assumes a related-party transaction between Company A, the buyer, and Company B, the seller, where one individual is the controlling shareholder of both buyer and seller and a member of both their boards of directors. The transaction is overpriced and causes damages to the buyer.) The
shareholder is a minor shareholder (not a controlling shareholder).
This criterion is part of the index because it is important for companies to raise the capital they need to grow, innovate, diversify, and compete. To make that possible,a
country needs the trust of investors. If you don’t have a working equity market,banks become the only source of finance.
According to Doing Business,the countries ranked higher support trustworthy financial information for investors, participation by investors in major decisions of the company, and the accountability of directors for their managerial decisions.
At first this seems to be a political question – and only a political question. But if we have a closer look at the best practices and reform examples of Doing Business, the usefulness of IT in this context can be detected easily.