Business Ethics and Corporate Governance, Second Edition

OUTSIDER SYSTEM

Dispersed ownership is the other type of ownership structure. In this scenario, there are a large number of owners each holding a small number of company shares. Small shareholders have little incentive to closely monitor a company’s activities and try not to be involved in management decisions or policies. Hence, they are called outsiders, and dispersed ownership structures are referred to as outsider systems.

Common law countries such as the UK and the US tend to have dispersed ownership structures. The outsider system or Anglo-American, market-based model is characterized by the ideology of corporate individualism and private ownership, a well-developed and liquid capital market, with a large number of shareholders and a small ...