The false hope of stewardship in the context of controlling shareholders: Making sense out of the global transplant of a legal misfit

• Main Author: PUCHNIAK, Dan W.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2021
• Subjects: Business Organizations Law
• Online Access: https://ink.library.smu.edu.sg/sol_research/4387; https://ink.library.smu.edu.sg/context/sol_research/article/6345/viewcontent/the_false_hope.pdf
• Institution: Singapore Management University

The 2008 Global Financial Crisis (GFC) rocked the foundation of the United Kingdom’s financial system. As the dust settled, the UK tried to figure out what went wrong. An autopsy of UK corporate governance revealed that it had developed an acute problem. Institutional investors had come to collectively own a substantial majority of the shares of listed companies, but often lacked the incentive to use their collective ownership rights to monitor them. The failure of these rationally passive institutional investors to act as engaged shareholders—or, as is now the popular vernacular, to be “good stewards”—allowed corporate management to engage in excessive risk taking and short-termism, which were primary contributors to the GFC.