Transnational Corporate Governance: The State of the Art and Twenty-First-Century Challenges

This chapter explores corporate governance as a transnational regulatory field. Mirroring the rise in importance of the idea of shareholder wealth maximization as a firm’s definitive performance measure, corporate governance became a hotly contested field of competing visions of firms’ institutional and normative infrastructure in search of creating the most advantageous conditions to attract capital in volatile markets. This shift occurred at the same time that regulatory transformations in Western postindustrial societies since the early 1980s had begun to significantly shift public service provision and state-organized frameworks for old-age security guarantees and access to health services. Today’s corporate governance laboratory is a transnational force field, fought over by a host of different state and nonstate actors and also by private actors such as institutional investors. Meanwhile, following the financial crises in 2001, 2008 and 2020 and the simultaneously growing pressure on corporations from human rights, gender equality, and environmental groups, the corporate governance debate again is shifting. This time, a diversity of issues are being discussed under the corporate governance rubric, indicating a more comprehensive engagement with the firm’s purpose and functions and its societal obligations and responsibilities. Given the crucial role of firms as the residual claimants of a wide-ranging retreat of the state from its role in guaranteeing and providing a wide range of social functions, corporate governance is a mirror for the transformation of public and private power, and it has to address the twenty-first-century challenges, including global value chains and the proliferation of institutional investors, unfolding on a planetary scale.

Shareholder Wealth Maximization and Investment Decisions of Nigerian Food and Beverage Companies

The study examines the effect of shareholder wealth maximization on investment decision in food and beverage companies listed in Nigeria. To achieve this, seven listed food and beverage companies were selected. The research adopted an ex post facto research design, while purposeful and stratified sampling techniques were used to select seven out of the fifteen companies in the food and beverage subsector. Data for the study were extracted from the annual reports and accounts of the sampled companies from 2008–2017. The result obtained from the regression analysis reveals that earnings per share and market price per share have no significant positive effect on investment decisions, while dividend per share was found to have no significant negative effect on investment decisions. In effect, the study concludes that the unique combination of the identified proxies for shareholder wealth maximization have jointly a significant positive effect on investment decisions. Arising from this, the study recommends that food and beverage companies should improve more on earnings per share, dividend per share, and market price per share so as to attract more investment from shareholders.

Value Creation, Appropriation, and Distribution: How Firms Contribute to Societal Economic Inequality

Firms are central to wealth creation and distribution, but their role in economic inequality in a society remains poorly studied. In this essay, we define and distinguish value distribution from value creation and value appropriation. We identify four value distribution mechanisms that firms engage in and argue that shareholder wealth maximization approach skews the value distribution toward shareholders and top executives, which in turn contributes to rising economic inequalities around the world. We call on organizational scholars to study the value distribution role of firms and its consequences for society, and introduce the articles in this volume of the special issue on economic inequality, business, and society.

The Role of Skewness in Mergers and Acquisitions

Investors prefer stocks with idiosyncratic skewness in their returns, which may be evidence of behavioral biases. Previous research suggests that skewness is related to the choice of target in corporate acquisitions, which may reflect CEOs’ behavioral biases. However, if the acquiring firms’ stock returns are also skewed, then the acquirer CEOs may rationally use their stock as currency in these deals. We investigate the skewness of the acquiring firm and the method of payment to determine if takeovers involving high skewness stocks are consistent with shareholder wealth maximization. We find that firms with high levels of skewness are more likely to become takeover targets and that takeover premiums increase with skewness, but there is no relation between the target’s skewness level and acquirer announcement returns. We also find that acquirers with high skewness are more likely to pay with stock and have higher announcement returns. We conclude that acquirer CEOs often take advantage of investor preference for skewness when undertaking mergers and acquisitions activity.

The Responsibilities of Carbon Major Companies: Are They (and Is the Law) Doing Enough?

Transnational carbon major companies are responsible for over 30% of global industrial greenhouse gas emissions and exert tremendous influence over future global climate trajectories. Yet, they are not governed through top-down, stringent emissions limits, but are instead regulated largely by disclosure-only domestic requirements and market-based or voluntary corporate social responsibility mechanisms. Through an examination of the requirements of domestic laws such as the United Kingdom (UK) Climate Change Act 2008 and the UK Energy Act 2013, as well as the environmental and sustainability reports produced under the UK Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, this article analyzes the regulatory requirements placed on carbon majors, and the climate change pledges and emissions of five UK-based carbon majors: BP, Royal Dutch Shell, BG Group, National Grid, and Centrica. The article concludes that the efforts to curb emissions in these carbon major entities are being subverted by company law, company theory and commercial norms such as shareholder wealth maximization.

Linkage of Management Decisions to Shareholder’s Value: EVA Concept

<p>In this paper, the author investigated the influence of management decisions like capital structure, dividend policies, remunerations, credit policy decisions and investment decisions on shareholder wealth maximization. The main objective of this paper is to increase awareness and relationship between management and shareholders of the companies. To achieve the objective, portfolio theory, capital asset pricing model and modern financial theory providing evidence on the linkage between management decisions to shareholder’s value. Shareholders are only concerned about the value of shares of the company and the amount of return in the form of dividend paid. Thus in order to meet the demands of the shareholders of the company, managers needs to increase their abilities and skills to overcome the organizational goals. Thus the main goal of this paper is to discuss on the role of management decisions towards increasing shareholder’s wealth and meet organizational goals.</p>