The Firm Divided

2017 ◽  
Author(s):  
Graeme Guthrie
Keyword(s):  
Corporate Governance ◽  
Conceptual Framework ◽  
Board Of Directors ◽  
Academic Research ◽  
Corporate Control ◽  
Best Interests ◽  
Case Tools ◽  
Market For Corporate Control ◽  
Performance Based Pay ◽  
And Performance

This book investigates the conflict between the managers and shareholders of large corporations. Shareholders want managers to act in ways that make their shares as valuable as possible, but managers ultimately want to maximize their own wellbeing. The outcome of manager-shareholder conflict is largely determined by a firm’s board of directors, which engages in a sequence of bargaining games with the firm’s managers. The book presents a conceptual framework for understanding board-manager interactions that is underpinned by decades of academic research into corporate governance. It shows how boards monitor managers, and the problems they face when doing so. It shows how boards provide incentives for managers to work in shareholders’ best interests, using a combination of ownership stakes and performance-based pay. And it also shows how boards delegate monitoring to outside parties, including by determining the effectiveness of the market for corporate control. In every case, tools that can benefit shareholders when used by strong boards can actually harm shareholders when used by weak boards. The book shows all of this by blending the stories of particular firms and individuals with the insights of academic research, helping the non-specialist reader understand how the seemingly disparate events it describes can be understood through the lens of manager-shareholder conflict.

Tradeoffs in Corporate Governance: Evidence From Board Structures and Charter Provisions

2011 ◽  
Vol 01 (04) ◽  
pp. 667-705 ◽  
Author(s):  
Stuart L. Gillan ◽  
Jay C. Hartzell ◽  
Laura T. Starks
Keyword(s):  
Corporate Governance ◽  
Corporate Control ◽  
Board Independence ◽  
Governance Structures ◽  
Board Structure ◽  
System Of Equations ◽  
Costs And Benefits ◽  
Market For Corporate Control ◽  
Monitoring Mechanism ◽  
Three Stage Least Squares

We provide arguments and present evidence that corporate governance structures are composed of interrelated mechanisms, which are in turn endogenous responses to the costs and benefits firms face when they choose those mechanisms. Examining board structures and the use of corporate charter provisions in a sample of more than 2,300 firms over a four-year period, we find that firms cluster in their use of governance mechanisms. In particular, the set of charter provisions that firms use, as measured by the Gompers et al. (2003) G Index, is associated with board structure, with the laws of the state in which the firm is incorporated, and with firm and industry characteristics. We also find that some governance structures appear to serve as substitutes. Specifically, firms that have powerful boards (as measured by board independence) also have the greatest number of charter provisions, suggesting that the market for corporate control is less effective as a monitoring mechanism for these firms. In contrast, firms that have less powerful boards tend to have few charter provisions, suggesting that the market for corporate control plays a greater monitoring role at such firms. To address potential endogeneity issues, we employ three-stage least squares analysis to estimate these relationships within a system of equations. Our results from this analysis are consistent with the hypothesis that powerful boards serve as a substitute for the market for corporate control. Finally, our findings suggest that causality runs from the board to the choice of charter provisions, but not vice versa.

scholarly journals Corporate Governance and Innovation: Theory and Evidence

2014 ◽  
Vol 49 (4) ◽  
pp. 957-1003 ◽  
Author(s):  
Haresh Sapra ◽  
Ajay Subramanian ◽  
Krishnamurthy V. Subramanian
Keyword(s):  
Corporate Governance ◽  
Corporate Control ◽  
Empirical Support ◽  
Innovation Theory ◽  
Private Benefits ◽  
Private Benefits Of Control ◽  
Market For Corporate Control ◽  
Ex Post ◽  
Corporate Governance Mechanisms ◽  
Ex Ante

AbstractWe develop a theory to show how external and internal corporate governance mechanisms affect innovation. We predict a U-shaped relation between innovation and external takeover pressure, which arises from the interaction between expected takeover premia and private benefits of control. Using ex ante and ex post innovation measures, we find strong empirical support for the predicted relation. We exploit the variation in takeover pressure created by the passage of antitakeover laws across different states. Innovation is fostered either by an unhindered market for corporate control or by antitakeover laws that are severe enough to effectively deter takeovers.

A Behavioral Perspective on Corporate Law and Corporate Governance

2015 ◽  
Author(s):  
Jaap Winter
Keyword(s):  
Corporate Governance ◽  
Executive Compensation ◽  
Board Of Directors ◽  
Corporate Law ◽  
The Core ◽  
Compensation Systems ◽  
The Board Of Directors ◽  
Performance Based Pay ◽  
Rule Making ◽  
Behavioral Perspective

This chapter examines corporate law and governance from a behavioral perspective. It begins with an overview of the growing body of behavioral knowledge and its impact on the core assumptions of the agency theory. It then goes on to consider a number of specific areas of corporate law and governance where behavioral perspectives are particularly relevant, with particular emphasis on rule making. The chapter also explores how the board of directors performs, along with modern executive compensation systems, often in the form of performance-based pay. Finally, the chapter turns to the interaction between executives, non-executives, and (institutional) investors in corporate governance.

scholarly journals Doxa of Shareholders and Owners: On the Threshold of Financialization

2017 ◽  
Vol 8 (3) ◽  
Author(s):  
Karin Jonnergård ◽  
Ulf Larsson-Olaison
Keyword(s):  
Conceptual Framework ◽  
Institutional Investors ◽  
Shareholder Value ◽  
Corporate Control ◽  
Public Debate ◽  
Equal Treatment ◽  
Controlling Shareholders ◽  
Value Perception ◽  
Market For Corporate Control ◽  
Local Actors

Abstract Following financialization, there has emerged an understanding of what it implies to be a shareholder based on the shareholder value perception. However, as this shareholder value perception spreads internationally, it clashes with traditional perceptions. In this paper, we apply the language developed by Bourdieu to a Swedish public debate on equal treatment of shareholders in connection with the reform of the Swedish market for corporate control. Using Bourdieu’s conceptual framework, we describe how a global development interacts with the persistence of national practices. We conclude that in Sweden, local institutional investors have allied themselves with international institutional investors to enhance their positions in the restricted field of Swedish corporate control. Shareholder value is then used by these local actors as an argument to strengthen their position. At the same time, some of the controlling shareholders depart from their traditional position as industrial entrepreneurs and embrace a more financial approach to ownership, thereby altering both the power constellations and the capital, in Bourdieu’s sense, of the field.

scholarly journals Corporate governance mechanisms for publicly-traded companies

2008 ◽  
Vol 5 (4) ◽  
pp. 309-314 ◽  
Author(s):  
Sean M. Hennessey
Keyword(s):  
Corporate Governance ◽  
Board Of Directors ◽  
Best Interests ◽  
Minimal Cost ◽  
Publicly Traded ◽  
Senior Managers ◽  
Compensation Plans ◽  
Publicly Traded Companies ◽  
Corporate Governance Mechanisms ◽  
The Board Of Directors

The resolution of conflicts between shareholders and managers, at minimal cost, is the goal of corporate governance. This paper discusses four mechanisms, two internal, two external, that attempt to ensure managers act in the best interests of shareholders: 1) the board of directors, 2) management compensation plans, 3) the market, and 4) takeovers. Theoretically, these four forms of corporate governance should ensure management maximizes shareholder value. But, agency costs are real for shareholders. In practice each the mechanisms may be severely limited in their ability to protect shareholders. The best protection is an independent, credible board of directors. Without good boards, shareholders are left to the mercy of the agents. In such cases, it is very difficult, and expensive, to discipline the senior managers of a publicly-traded company

scholarly journals Ownership structure and performance: A comparison of different corporate governance systems

2005 ◽  
Vol 2 (4) ◽  
pp. 76-85 ◽  
Author(s):  
Alberto de Miguel Hidalgo ◽  
Julio Pindado ◽  
Chabela de la Torre
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Ownership Concentration ◽  
Institutional Factors ◽  
Insider Ownership ◽  
Market For Corporate Control ◽  
Governance Systems ◽  
The World ◽  
And Performance ◽  
The Relationship

This paper analyses how the main institutional factors characterizing corporate governance systems around the world affect the relationship between ownership structure and firm performance. Our analysis gives rise to the following remarks. First, ownership concentration and insider ownership levels are determined by several institutional features such as investor protection, development of capital markets, activity of the market for corporate control, and effectiveness of boards. Second, the relationship between ownership concentration and performance is not directly affected by these institutional factors. Third, there is, however, a direct influence of corporate governance characteristics on the relationship between insider ownership and performance.

scholarly journals Beyond Dichotomy: The Curvilinear Impact of Employee Ownership on CEO entrenchment

2019 ◽  
Vol 22 (2) ◽  
pp. 112-127 ◽  
Author(s):  
Xavier Hollandts ◽  
Nicolas Aubert ◽  
Abdelmehdi Ben Abdelhamid ◽  
Victor Prieur
Keyword(s):  
Corporate Governance ◽  
Corporate Control ◽  
Listed Companies ◽  
Employee Ownership ◽  
Curvilinear Relationship ◽  
Stock Ownership ◽  
Employee Stock Ownership ◽  
Market For Corporate Control ◽  
Legislative Changes ◽  
The Relationship

Employee stock ownership gives employees a voice and therefore may have a major impact on corporate governance. Thus, employee stock ownership may be a powerful mean to protect CEOs from both market for corporate control and dismissal threat. In this paper, we examine the relationship between employee stock ownership and CEO entrenchment. Following the recent French legislative changes, we use a comprehensive panel dataset of the major French listed companies over the 2009-2012 period. We document inverted U-shaped relationships between employee stock ownership and CEO entrenchment. Board employee ownership representation also plays a role and increases the inflexion points of these curvilinear relationship.

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