scholarly journals Shareholder Primacy and the Trajectory of UK Corporate Governance

2003 ◽  
Vol 41 (3) ◽  
pp. 531-555 ◽  
Author(s):  
John Armour ◽  
Simon Deakin ◽  
Suzanne J. Konzelmann
Keyword(s):  
Corporate Governance ◽  
Shareholder Primacy

Reversing Financialization

2018 ◽  
Author(s):  
Simon Deakin
Keyword(s):  
Corporate Governance ◽  
Corporate Strategy ◽  
Negative Impact ◽  
Focal Point ◽  
Employee Voice ◽  
Board Structure ◽  
Shareholder Primacy ◽  
Financial Interests ◽  
Legal Model ◽  
Legislative Framework

The debate over corporate governance is skewed by the common misunderstanding that shareholders are the owners of companies, and are entitled to have them run in their interest. The legal model of the firm is more nuanced, seeing the corporation as a complex entity characterized by co-operation between the suppliers of capital and labour, with a co-ordinating role for management. The elevation of shareholder primacy as a focal point for corporate strategy over recent decades is the result of government deferring to financial interests in the making of rules governing takeovers and board structure. Reversing financialization, and the negative impact it is having on social cohesion and innovation, will require a new legislative framework for corporate governance, with a greater role for employee voice and a reorientation of investment priorities.

Corporate Governance: What Are the Issues?

2020 ◽  
pp. 10-42
Author(s):  
Helmut K. Anheier ◽  
Christoph M. Abels
Keyword(s):  
Corporate Governance ◽  
Global Financial Crisis ◽  
Shareholder Primacy ◽  
Board Diversity ◽  
Corporate Governance Mechanisms ◽  
Corporate Governance Codes ◽  
History Of ◽  
Increasing Demand ◽  
The Global Financial Crisis ◽  
Corporate Social

Traditionally, corporate governance is about agency problems caused by the division of ownership and control. This chapter moves beyond this understanding. Starting with a theoretical overview, the chapter reviews different approaches to corporate governance and discusses shareholder primacy in light of the increasing demand for corporate social responsibility. Afterwards, a brief history of the development of corporate governance codes is given, followed by the role of corporate governance during the global financial crisis. Different corporate governance mechanisms, such as independent directors, board composition, and member diversity, as well as executive remuneration are subsequently discussed. Problems specific to corporate governance of technology companies are also highlighted, as well as the lessons Germany’s co-determination law can teach for the understanding of board diversity. The chapter concludes with a brief reflection on shareholder primacy, a diversifying corporate world, and the future of corporate governance codes.

scholarly journals Transplantation of Anglo-American corporate governance and its impact on financial market growth: a comparative analysis of nineteen developing countries 1995-2014

2019 ◽  
Vol 19 (5) ◽  
pp. 884-922 ◽  
Author(s):  
Navajyoti Samanta
Keyword(s):  
Developing Countries ◽  
Corporate Governance ◽  
Financial Market ◽  
Research Paper ◽  
Financial Economic ◽  
Multilevel Regression ◽  
Shareholder Primacy ◽  
Content Type ◽  
Market Growth ◽  
Anglo American

Purpose Since the late 1990s, developing countries have been encouraged by international financial organisations to adopt a shareholder primacy corporate governance model. It was anticipated that in an increasingly globalised financial market, countries which introduced corporate governance practices that favour investors would gain a comparative advantage and attract more capital leading to financial market growth. This paper aims to empirically test this hypothesis. Design/methodology/approach The present research paper quantitatively investigates whether adopting shareholder primacy corporate governance norms has had any impact on the growth of the financial market, focusing on nineteen developing countries between 1995 and 2014. Time series indices are prepared for corporate governance regulations, financial market development along with three control indices. Then a lagged multilevel regression between these indices is used to investigate the strength of causality between the adoption of pro-shareholder corporate governance and the growth of the financial market. Findings The research paper finds that shifting towards a shareholder primacy model in corporate governance has a very small effect on growth of financial market in developing countries. Overall the financial, economic and technological controls have much more impact on the growth of financial markets. Originality/value This paper conclusively ends the discussion as to whether change in corporate governance has any impact on financial market growth of a country. The papers uses Bayesian econometric model. The paper thus signals the end of LLSV led question as to whether law can affect finance.

Bank Governance

2016 ◽  
Author(s):  
John Armour
Keyword(s):  
Adverse Effect ◽  
Corporate Governance ◽  
Financial Crisis ◽  
Executive Compensation ◽  
Agency Costs ◽  
Shareholder Primacy ◽  
Management Agency ◽  
Bank Managers ◽  
Governance Practices ◽  
Governance Tools

According to a common narrative, the failure of banks in the financial crisis reflected poor corporate governance practices, as well as inadequate prudential regulatory safeguards. Yet it turns out that the “best” governance practices according to ordinary standards were the ones that did worst during the financial crisis. In the period leading up to the financial crisis, it was believed that regulation would cause banks to internalize the costs of their activities, meaning that what maximized bank shareholders’ returns would also be in the interests of society. Consequently, large banks used the same governance tools as non-financial companies to minimize shareholder-management agency costs, namely independent boards, shareholder rights, the shareholder primacy norm, the threat of takeovers, and equity-based executive compensation. Unfortunately, such tools had the adverse effect of encouraging bank managers to take excessive risks. Consequently, a significant rethink about the way in which banks are governed is required.

scholarly journals Evolution of corporate governance in India and its impact on the growth of the financial market: an empirical analysis (1995-2014)

2019 ◽  
Vol 19 (5) ◽  
pp. 945-984
Author(s):  
Shouvik Kumar Guha ◽  
Navajyoti Samanta ◽  
Abhik Majumdar ◽  
Mandeep Singh ◽  
Ananya Bharadwaj
Keyword(s):  
Corporate Governance ◽  
Regression Analysis ◽  
Financial Market ◽  
Outcome Variable ◽  
Shareholder Rights ◽  
Shareholder Primacy ◽  
Content Type ◽  
Market Growth ◽  
Shareholder Protection ◽  
Governance Regime

Purpose The past few decades have seen a gradual convergence in corporate governance norms the world over, entailing a discernible shift towards shareholder primacy models. It holds particularly true of developing countries, many of which have steadily amended corporate governance norms to enhance the scope of shareholder rights. This is usually justified through the rationale that increasing protection for foreign investors and shareholders would mean greater investment in capital market and overall financial market development. In India, the shift coincides with a series of fundamental economic and financial policy reforms initiated in the 1990s: collectively and loosely referred to as “liberalisation”, this process marks a paradigm-shift from a tightly controlled welfare economy to one considerably more laissez-faire in its orientation. A fallout of which was that the need to attract and sustain foreign investments acquired an unprecedented significance. The purpose of this paper is to help the readers understand in this larger context the corporate law reform initiatives in India, particularly those pertaining to shareholder rights and allied issues. Design/methodology/approach This paper empirically tests the hypothesis that enhanced shareholder protection leads to greater levels of investments, and financial developments generally. It then uses regression analysis to detect if the change in corporate governance, making it more shareholder-friendly, has had any effect on growth in financial market. It is divided into two broad parts. The first tracks the evolution of corporate governance norms in India. A robust qualitative and quantitative analysis is used to determine the tilt towards a shareholder primacy regime that Indian corporate governance regime now displays. The second chapter deals with the regression analysis where the outcome variable is financial market growth, and explanatory variable is the change in the governance regime with relevant control variables. Findings The authors find that change in shareholder primacy corporate governance has little effect on financial market growth in India. The authors would suggest that instead of changing the law in books, more emphasis should be given to implement those regulations and increase the overall rule of law. Originality/value This is the first time that such a wide-scale study has been conducted in India, using Bayesian methods. It ought to be of immense value to professionals and academics both.

Corporate Governance

2018 ◽  
Author(s):  
Jackie Krafft ◽  
Jacques-Laurent Ravix
Keyword(s):  
Corporate Governance ◽  
High Risk ◽  
Empirical Evidence ◽  
Negative Relationship ◽  
Positive Relationships ◽  
Shareholder Primacy ◽  
Innovative Performance ◽  
Governance Practices ◽  
The Impact

Little attention has been devoted to the impact of corporate governance practices on firms’ innovative performance. This chapter reviews the literature to show that there is theoretical ambiguity. There is the argument that corporate governance and new forms of finance realign managers’ interests, with greater efficiency for all types of investments. However, some argue that innovative R&D has distinctive characteristics, like high risk and long-term horizon, that may modify the efficiency effect. The issue has generated many studies where the long tradition of positive relationships between governance and efficiency is now contrasted by some recent empirical evidence suggesting a negative relationship. The chapter argues that shareholder primacy or owner activism in corporate governance and new forms of finance represent a potential mismatch with innovation.

Italian banking regulation and the legal obstacles to corporate governance convergence

2019 ◽  
Vol 24 (5) ◽  
pp. 493-514 ◽  
Author(s):  
Olivier Butzbach ◽  
Gennaro Rotondo
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Banking Regulation ◽  
Point Of View ◽  
Sources Of Resistance ◽  
Shareholder Primacy ◽  
Italian Case ◽  
Governance Practices ◽  
Anglo American ◽  
Many Sources

An ongoing dispute in comparative corporate governance studies concerns the extent to which cross-country convergence towards, essentially, the shareholder primacy view is occurring. While some scholars, especially legal scholars and economists, have predicted (and sometimes advocated) a convergence of corporate governance practices towards the Anglo-American model of (seemingly) shareholder primacy, others sharply disagree and point to the persistence of stakeholder-oriented governance in many countries. Banking, from the point of view of corporate governance convergence, is an interesting industry, for at least two reasons: (i) banks are peculiar types of business organizations, entailing specific governance rules in most systems; (ii) banks are (monetary) financial intermediaries more and more active on capital markets, and thus more and more exposed to the isomorphic pressures generated on corporate governance by those markets. Thus, predictions on the convergence or divergence of banks’ corporate governance are not easy to make. The present paper aims to contribute to the scholarly dispute by analysing the Italian case, which has seen, over the past 30 years or so, an apparently unfettered process of transformation of banks’ governance and ownership towards the shareholder primacy model – a process epitomized by the recent reforms of the country’s cooperative banking sector. ‘Apparently’, because a closer look at the legal and regulatory bases of banks’ corporate governance actually shows many sources of divergence from the shareholder primacy model. Thus, the contribution proposed by the present study is twofold: first, it extends the ‘convergence’ discussion to the banking industry, where specific dynamics may help us better ‘test’ the hypotheses developed in the ‘convergence’ debate; second, it emphasizes alternative divergent patterns to those normally identified in the literature, where divergent ‘practice’ is often opposed to converging laws. Here, the sources of resistance to convergence are found in law itself.

Economic Policies for Innovative Enterprises: Implementing Multi-Stakeholder Corporate Governance

2021 ◽  
pp. 048661342110266
Author(s):  
Lenore Palladino
Keyword(s):  
Decision Making ◽  
Corporate Governance ◽  
Social Life ◽  
Stakeholder Participation ◽  
The United States ◽  
Jel Classification ◽  
Fiduciary Duty ◽  
Shareholder Primacy ◽  
Innovative Enterprise ◽  
Multi Stakeholder

Large corporations dominate economic and social life in the United States and around the globe. The mainstream corporate governance ideology of “shareholder primacy” claims that the exclusive purpose of a corporation is to generate returns for shareholders, which means that governance decisions should be exclusively in their hands. However, shareholder primacy lacks a theory of how companies innovate, and instead focuses solely on allocation of corporate profits, misunderstanding the relationship of shareholders to the twenty-first-century corporation. The theory of the corporation as an innovative enterprise—engaged in productive innovation by producing higher-quality goods and services for lower unit costs—is an accurate way to understand what makes corporations successful producers. Stakeholder theory from progressive legal scholarship illustrates specific corporate governance institutions that can assist innovation, including fiduciary duty, stakeholder participation in decision making, and equity ownership. This article contributes to the growing literature refuting shareholder primacy by utilizing the theories of the innovative enterprise and multi-stakeholder governance to propose reshaping US corporate governance to better to serve innovation in production and a balance of power in distributional decision making. JEL classification: B50, D21, G30, G35, K22

Shareholder primacy corporate governance and financial market growth

2019 ◽  
Vol 19 (5) ◽  
pp. 845-848
Author(s):  
Navajyoti Samanta ◽  
Andrew Johnston
Keyword(s):  
Corporate Governance ◽  
Financial Market ◽  
Shareholder Primacy ◽  
Market Growth
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