Enforcement, as much as possible, through actions by direct participants in the corporate enterprise(shareholders, directors, and managers), rather than indirect participants (judges, regulators, legal and accounting professionals, and the financial press) (i) Greater protection of outside shareholders than is common in developed economies, to respond to a high incidence of insider-controlled companies, the weakness of other constraints on self-dealing by managers and controlling shareholders and the need to control self-dealing to strengthen the political credibility of a market economy (iii) Reliance on procedural protections --such as transaction approval by independent directors, independent shareholders, or both - rather than on flat prohibitions of suspect categories of transactions. The use of procedural devices balances the need for shareholder protection against the need for business flexibility (iv)Whenever possible, use of bright-linerules, rather than standards, to define proper and improper behavior. Bright-line rules can be understood by those who must comply with them and have a better chance of being enforced. Standards, in contrast require judicial interpretation, which is often unavailable in emerging markets, and presume a shared cultural understanding of the regulatory policy that underlies the standards, which may also be absent. 7 (v)Strong legal remedies on paper, to compensate for the low probability that the sanctions will be applied in fact Enforcement takes place primarily through a combination of voting transactional rights. The central voting elements include: shareholder approval (including in some cases supermajority approval or approval by a majority of outside shareholders) for broad classes of major transactions and self-interested transactions; approval of self-interested transactions by a majority of outside directors; mandatory cumulative voting for directors, which empowers large minority shareholders to select directors(this power is protected by requirements of one common share, one vote, minimum board size; and no staggering of board terms); and a unitary ballot on which both managers and large shareholders can nominate directors. The honesty of the vote is protected through confidential voting and independent vote tabulation, while the quality of voting decisions is buttressed by mandatory disclosure We use here the conventional distinction between a precise"rule"(don't drive faster than 55 miles per hour)and a vague"standard"(don 't drive faster than appropriate for the road and weather conditions). See Louis Kaplow, Rules Versus Standards: An Economic Analysis, 42 Duke L.J. 557(1992)7 We use here the conventional distinction between a precise "rule" (don't drive faster than 55 miles per hour) and a vague "standard" (don't drive faster than appropriate for the road and weather conditions). See Louis Kaplow, Rules Versus Standards: An Economic Analysis, 42 Duke L.J. 557 (1992). 4 (i) Enforcement, as much as possible, through actions by direct participants in the corporate enterprise (shareholders, directors, and managers), rather than indirect participants (judges, regulators, legal and accounting professionals, and the financial press). (ii) Greater protection of outside shareholders than is common in developed economies, to respond to a high incidence of insider-controlled companies, the weakness of other constraints on self-dealing by managers and controlling shareholders, and the need to control self-dealing to strengthen the political credibility of a market economy. (iii) Reliance on procedural protections -- such as transaction approval by independent directors, independent shareholders, or both -- rather than on flat prohibitions of suspect categories of transactions. The use of procedural devices balances the need for shareholder protection against the need for business flexibility. (iv) Whenever possible, use of bright-line rules, rather than standards, to define proper and improper behavior. Bright-line rules can be understood by those who must comply with them and have a better chance of being enforced. Standards, in contrast, require judicial interpretation, which is often unavailable in emerging markets, and presume a shared cultural understanding of the regulatory policy that underlies the standards, which may also be absent.7 (v) Strong legal remedies on paper, to compensate for the low probability that the sanctions will be applied in fact. Enforcement takes place primarily through a combination of voting rules and transactional rights. The central voting elements include: shareholder approval (including in some cases supermajority approval or approval by a majority of outside shareholders) for broad classes of major transactions and self-interested transactions; approval of self-interested transactions by a majority of outside directors; mandatory cumulative voting for directors, which empowers large minority shareholders to select directors (this power is protected by requirements of one common share, one vote; minimum board size; and no staggering of board terms); and a unitary ballot on which both managers and large shareholders can nominate directors. The honesty of the vote is protected through confidential voting and independent vote tabulation, while the quality of voting decisions is buttressed by mandatory disclosure rules