How Shareholders Can Positively Influence Corporate Governance

10 Dec 2019

Heterogeneous and diverse ownership have implications on how companies are governed in the 21st century. Differing shareholder goals should be taken into account when making recommendations or setting policy.

The Social Trends Institute is pleased to have provided the financial support for the Corporate Governance and Ownership with Diverse Shareholders Conference co-organized by IESE’s Center for Corporate Governance (CCG) and the European Corporate Governance Institute (ECGI), the world’s leading research institution on corporate governance.  The event, held October 25-26 at IESE’s Barcelona campus, brought together the leading scholars in the field, CEOs and top executives, chairs of boards, investors, regulators, and multilateral organizations. 

Two days of sessions considered the following topics: evolution of ownership: its impact on corporate governance; passive investors; corporate governance through voice and exit; activist directors and agency costs; mutual funds as venture capitalists; the long-term consequences of short-term incentives; and common ownership. Additionally, a CEOs roundtable featured Amra Balic, managing director of BlackRock, Jordi Gual, chairman of CaixaBank, and Ikea co-CEO, Juvencio Maetzu. The gathering was moderated by IESE strategic management professor Jordi Canals – former dean of IESE, CCG president, and vice president of STI.

Many policy recommendations that emerge from the flourishing literature on corporate governance do not take into account the diversity of company owners and the different goals of heterogeneous shareholders in the 21st century. Many of them make the assumption that dispersed shareholders are the representative form of corporate ownership. This hypothesis is still dominant in most theoretical studies and in many empirical studies.

The fact is that ownership around the world in the twentieth century changed in many large countries, has become more heterogeneous and diverse than what is assumed in many studies, and its evolution is shaped by a diversity of factors, such as domestic taxation and regulation, capital markets and different management and business practices.

Understanding that ownership is heterogeneous and diverse has implications on how companies are governed. It is also critical for the improvement of corporate governance at the corporate level and the government’s regulatory activity. In the end, it has an impact on companies’ survival and long-term development –many firms that have not survived encountered problems with their own shareholders and their commitment.

This Conference offered a context to reflect upon and better understand how the different nature of shareholders have an impact on the way companies are governed and managed, and, eventually, on some key decisions that define corporate governance –like board composition, board dynamics, CEO hiring and firing, strategy making and incentives design.

 

Download conference presentations here.

A summary video is available here.