Epilogue: Challenges to the UK System of Ownership and Control

Abstract

After 1990, activism by traditionally dominant institutional shareholders increased and ‘offensive’ shareholder activism (primarily by hedge funds) and ‘public-to-private’ buyouts carried out by private equity firms became part of UK corporate governance. While activism implies a ‘hands on’ approach to the running of public companies and private equity buyouts involve the removal of companies from the stock market, these trends do not pose a threat to outsider/arm's-length corporate governance. Instead, the institutional investors that have traditionally dominated share ownership (pension funds and insurance companies) have been exiting the UK stock market, the scepticism of neutral investors imposes significant limits on the viability of offensive activism, and private equity deal flow is modest in relation to the population of publicly traded companies. Moreover, since shareholder activism and private equity buyouts help to keep agency costs in check, they may even fortify current arrangements going forward.