Shareholder Model Research Articles

Profits Before Patients? Rethinking the Primary Shareholder Model of Corporate Governance For Health Care

Profits Before Patients? Rethinking the Primary Shareholder Model of Corporate Governance For Health Care

Stakeholders vs Shareholders: The Clash of Corporate Governance Models in Japan’s Fujitec Ltd. and Oasis Management Showdown

While UK/US firms, in response to efforts to become more sustainable and contribute to the Sustainable Development Goals, increasingly have been adopting a stakeholder model of corporate governance, the shareholder model that has dominated governance for the past several decades still exerts a great deal of influence over how UK/US firms behave. By contrast, Japan’s traditional model, emphasising community and long-term stability, lacks transparency. Recently, Japanese firms have begun aligning with UK/US governance, but this paper suggests the emergence of diverse sub-models, combining both models’ elements, will define the future. The case of Fujitec Ltd. and Oasis Management offers valuable insights for managers, policymakers, and practitioners to navigate international corporate governance complexities, support informed decision-making, and encourage effective stakeholder engagement.

Pioneer Valley Jazz Shares, Connecticut River Valley, Western Massachusetts, United States

Pioneer Valley Jazz Shares, Connecticut River Valley, Western Massachusetts, United States

Indigenous enterprise on customary lands: Diverse economies of surplus

This study examines Indigenous Fijian and Papua New Guinean enterprises on customary land. It explores the duality of merging Indigenous and Western principles of entrepreneurship and the ability to balance business and socio‐cultural imperatives. A qualitative, ethnographic‐case study approach is deployed, withtalanoa/tok storiused to collect empirical materials. Two interrelated themes emerged from the study: The need for Indigenous enterprise models to contribute to a more holistic conception of well‐being, and as a result, the requirement to rethink how surplus is distributed beyond mainstream shareholder ownership models. This study reveals a more nuanced approach to distributing surplus based on Indigenous conceptions of kinship. The specific theoretical contribution of this study is an Indigenous conception of surplus distribution that offers a challenge to traditional shareholder models.

Enterprise Models and the EU Agenda

The EU is leading the world with its roadmap for companies – the Sustainable Industry as part of the Green Deal, the EU Climate Target plan for 2030 and the New EU Industrial Strategy. At the same time, in pursuit of these crucial objectives, the Union is heavily dependent on the contribution of the private sector. The question is whether companies are equipped to follow this path and take on the associated responsibilities. Hurdles that so far received little attention now present themselves in the realm of governance and management, organisation structure and culture as the major determinants of corporate behaviour. This paper argues that the dominant enterprise models, the shareholder model and the stakeholder model, both serve as barriers to the shift from growth-oriented to sustainable, resilience-oriented capitalism. It stresses the need for alternative models and sketches the contours of a new competitive enterprise model that is firmly rooted in values continental Europeans share. It will be called the EU Model. Finally, it proposes an EU agenda for a level playing field, because competition between models should be encouraged. The day has come for politicians and policymakers to no longer limit themselves to rubberstamping corporate governance codes. They must actively engage in discussions about how the private sector organises itself. Bravery will be rewarded.

CORPORATE SOCIAL RESPONSIBILITY PRACTICES IN NIGERIA: AN EXPLORATION OF SELECTED PRIVATE SECTOR ORGANISATIONS

Agitation for societal development has been on for a long time in Nigeria. This has made many communities complain against organisations making profits in the poverty-ridden environments. It is for this reason that the communities call on the organisations to contribute to their development through corporate social responsibility (CSR) programmes. The study employed secondary methodology of desk research technique and found that organisations in the selected industries have contributed to the well-being of their communities. The study supports the position of the stakeholder theory that organisations should take care of all stakeholders and not only the shareholders. Going forward, it recommends that organizations in Nigerian industries should invest more in the area of corporate social investment as a form of CSR thereby ensuring that the people could achieve much needed development sustainably. Keywords: Corporate social responsibility, shareholder model, stakeholder model, stakeholder theory, sustainability.

Corporate Governance Models and the Possibility of Future Convergence

This study explains the main corporate governance models used in the United States of America, United Kingdom, Germany and Japan by analyzing their similarities, differences, strengths and weaknesses. In addition, the possibility of future convergence between these models is discussed. Two types of corporate governance models are used in the world: Shareholder and Stakeholder models. In this study, USA, and UK will be analyzed as an example of the shareholder model, whereas Germany and Japan will be discussed as an example of the stakeholder model. The shareholder model emphasizes the benefits of shareholders and the management dominates the decision-making procedure of the companies. The stakeholder model, on the other hand, puts more emphasis on the interests of stakeholders or capital market players such as the workers, suppliers and the public. On the convergence debate, four different arguments are identified: The first and the main one is against convergence seeing it as a distant dream because of the differences between the countries. The second argument supports and expects convergence in the near future. The third argument supports the argument of functional convergence rather than formal convergence. The fourth argument supports the combination of both shareholder and stakeholder models to get effective corporate governance practices.This research supports the first argument which is against convergence, because looking at the differences between the countries in their economic, legal and political frameworks, it is still impossible to suggest convergence. Each country will continue to adopt its style according to its culture and also according to its differing needs.

Financialization, labor market institutions and inequality

The last three decades have witnessed rising inequality and deepening financialization in post-industrial democracies. A rapidly growing literature has linked these two phenomena. We go beyond existing scholarship by specifying which aspects of financialization can be expected to increase inequality and where in the income distribution this effect will occur. We also show that this effect is contingent on institutional context. We posit that the shareholder model of corporate governance and the growing demand for financial professionals are the two dimensions of financialization that drive up pre-tax income inequality. Nevertheless, the spread of the shareholder value model only benefits the very top income earners. We further argue that the institutional strength of labor shapes the relationship between financialization and inequality. We analyze effects of indicators of these two dimensions of financialization on the top 1% and the next 9% income shares and on the 90:50 earnings ratio. We test our hypotheses with data on 18 post-industrial democracies between 1960 and 2015.

Fighting Short-Termism in EU Company Law after the Financial Crisis

The authors challenge the belief that the shareholder model dominates EU company law, to the detriment of corporate sustainability. The article argues that the last financial crisis has significantly moved EU regulation towards integrating stakeholder model into EU company law. The article seeks to identify means that the EU has employed to fight shareholder primacy norm. The article considers safeguards underpinning the corporate financial sustainability, alongside those aspects of corporate social responsibility which focus on the interaction between a financially sustainable company and sustainable society. Shareholder model, stakeholder model, share capital, accounting standards, corporate social responsibility

Corporate social responsibility strategies in Nigeria: a tinged shareholder model

PurposeThis paper aims to examine two important issues in corporate social responsibility (CSR) scholarship. First, the study problematises CSR as a form of self-regulation. Second, the research explores how CSR strategies can enable firms to recognise and internalise their externalities while preserving shareholder value.Design/methodology/approachThis study uses a tinged shareholder model to understand the interactions between an organisation’s CSR approach and the effect of relevant externalities on its CSR outcomes. In doing this, the case study qualitative methodology is adopted, relying on data from one Fidelity Bank, Nigeria.FindingsBy articulating a tripodal thematic model – governance of externalities in the economy, governance of externalities in the social system and governance of externalities in the environment, this paper demonstrates how an effective combination of these themes triggers the emergence of a robust CSR culture in an organisation.Research limitations/implicationsThis research advances the understanding of the implication of internalising externalities in the CSR literature in a relatively under-researched context – Nigeria.Originality/valueThe data of this study allows to present a governance model that will enable managers to focus on their overarching objective of shareholder value without the challenges of pursuing multiple and sometimes conflicting goals that typically create negative impacts to non-shareholding stakeholders.

How Corporate Governance Mechanisms of Banks Have Changed After the 2007–08 Financial Crisis

AbstractWeak and ineffective corporate governance mechanisms in banks have been pointed out as the main factor that contributed to the 2007–08 financial crisis. The purpose of this study is to analyze empirically how the global financial crisis of 2007–08 has impacted on banks’ governance mechanisms, comparing the differences between the two most important models of corporate governance (the shareholder and stakeholder models), and if these changes are related to improvements in banks’ governance effectiveness. To carry out our analysis, we have used a sample with 46 of the largest commercial banks in the world and the period of analysis has covered from 2002 until 2015. Our findings show that Anglo‐American banks following the common law system (shareholder model) maintained their high level of governance effectiveness after the financial crises. On the other hand, Continental European banks following the civil law system (stakeholder model) increased their effectiveness after the crisis changing some practices in their corporate governance mechanisms (improvements in the structure and functioning of directors’ boards, improvements in the compensation policy for banks’ executives, as well as the implementation of CSR committees) what led to a convergence of both governance systems.

Corporate Social Responsibility Strategies in Nigeria: A Tinged Shareholder Model

Purpose: This paper examines two important issues in CSR scholarship. First, the study problematizes corporate social responsibility (CSR) as a form of self-regulation. Second, the research explores how CSR strategies can enable firms to recognise and internalise their externalities while preserving shareholder value. Design/Methodology: This study employs a tinged shareholder model to understand the interactions between an organisation’s CSR approach and the effect of relevant externalities on its CSR outcomes. In doing this, we adopt the case study qualitative methodology, relying on data from one Fidelity Bank, Nigeria. Findings: By articulating a tripodal thematic model – governance of externalities in the economy, governance of externalities in the social system and governance of externalities in the environment, this paper demonstrates how an effective combination of these themes triggers the emergence of a robust CSR culture in an organisation. Research Implications: This research advances our understanding of the implication of internalising externalities in the CSR literature in a relatively under-researched context – Nigeria. Originality: Our data allows us to present a governance model that will enable managers to focus on their overarching objective of shareholder value without the challenges of pursuing multiple and sometimes conflicting goals that typically create negative impacts to non-shareholding stakeholders.

Corporate Finance and Sustainability: A Teaching Note

In the transition to a sustainable economy, companies are increasingly adopting the goal of In the transition to a sustainable economy, companies are increasingly adopting the goal of long-term value creation, which integrates financial, social and environmental value. That raises the fundamental question in corporate finance about the objective of the corporation. The current objective is maximising profit, which boils down to maximising shareholder value. But the shareholder model is holding companies back from sustainable business practices. An enhanced shareholder view recognises that it is instrumental to treat the other stakeholders well in order to preserve long-term shareholder value. An alternative view is to broaden the objective of the corporate to optimising the integrated value, which combines the financial, social and environmental value. In that way, the interests of stakeholders are ranked equally. Such a move to the stakeholder model requires new rules for corporate governance and decision-making on corporate investments to deal with the various interests of current and future stakeholders. This Teaching Note can be used in courses on corporate finance. It complements corporate finance textbooks, which usually adopt the shareholder model.

Shareholders in the Stakeholder Model

This paper examines the purpose of companies in a stakeholder and a shareholder model. It examines the interests of shareholders and stakeholders. In light of recent developments it examines the tension between the aforementioned interests. This paper argues that the tensions between the interests of stakeholders and shareholders are getting more and more aligned. Therefore, the tensions between stakeholder and shareholder interest in corporate law will become less relevant over time.

Debunking the myth of shareholder ownership of companies: Some implications for corporate governance and financial reporting

The shareholder primacy model is dominant in Anglo-Saxon corporate governance and financial reporting even though it is considered to be dysfunctional and a source of crisis. The possibilities of reforms are routinely stymied with the claims that shareholders are the owners of large corporations and management should promote their interests. This paper seeks to debunk such claims. It shows that a corporation is a distinct legal person and cannot be owned by its shareholders. It argues that shareholders in contemporary corporations are owners of ?fictitious? capital which is very distinct from ?real? capital. The systemic pressures require the holders of fictitious capital to constantly buy/sell shares in pursuit of short-term gains. The paper further shows that in a globalised economy, the shareholding duration in major UK companies has shrunk and shareholders are more dispersed than ever before. They are not in any position to control or direct corporations for the benefit of other stakeholders and society generally. The paper calls for abandonment of the shareholder model of governance and calls for empowerment of stakeholders with a long-term interest in the wellbeing of corporations.

The Case for Maximizing Long‐Run Shareholder Value

Criticism of the shareholder model of corporate governance stems in part from misunderstanding about what shareholder wealth maximization means for the other stakeholders of public companies. The corporate goal of shareholder wealth maximization does not imply that such stakeholders “do not matter.” Managers maximize shareholder value by maximizing the total expected cash flows available to distribute to all of their stakeholders. To maximize such cash flows, managers must provide their customers with desirable goods and services at attractive prices—which in turn requires that managers attract the employees, suppliers, and financial capital needed to conduct their businesses by providing each of these groups with market‐determined returns on their contributions to firm value. In this way, successful corporations benefit all of their stakeholders, and what is good for the corporation is generally good for society.External forces such as the media and government exert considerable influence on corporate actions and, in so doing, they play a role in helping to limit negative corporate “externalities” such as pollution and climate change. But direct regulation of productive activities should be used sparingly, and subjected to ongoing cost‐benefit analysis. Government regulation replaces the collective decisions of a broad marketplace of stakeholders using their own resources to act in their own interests with decisions made by government officials with complicated incentives and using resources generated by others. More generally, government should seek to regulate corporate actions only in the limited situations in which there are no market solutions for reducing the effects of externalities. For example, government plays a critically important role in identifying and deterring corporate fraud, and in ensuring competition and a level playing field for companies and all their stakeholders.

Earnings management in corporate enterprises in India

PurposeThe earnings management (EM) research on the impact of firm’s multi-nationality and reputation on the earnings’ quality is limited, particularly in the context of emerging economies like India. In India, the corporate ownership model is “Promoter-dominated shareholder model” wherein companies have global operations. The purpose of this paper is to analyze the EM practices of corporate enterprises in India about multi-nationality, reputation and related determinants.Design/methodology/approachThe present study employs DeAngelo model for calculating discretionary accruals for detecting EM. Multi-nationality, reputation and related determinants are measured as accounting indices. The statistical tools applied for testing the accuracy of results include correlation and regression analysis, t-test and descriptive statistics, like arithmetic mean, median and standard deviation.FindingsThe results show that multi-nationality is the driving force for EM and significantly affects the accounting choices of management in the sample units. The firm’s reputation and other related determinants, except size, vary with accruals. The earnings behavior of the corporate is influenced by other factors, like growth and leverage as well.Research limitations/implicationsA total of 12 units out of top 25 units, taken for the study, met the sampling requirements. So, the present study is confined to 12 profit-making private listed companies in India. These companies constitute a significant size of BSE’s market capitalization for completeness of data; still the size and diversity of units can be extended for further study. The period in the study is of five years (2003–2004 to 2007–2008) to find the effects of global recession on EM practices in India. Researchers may like to select a different time-period based on their objective.Practical implicationsThe study draws new dimensions about the quality of financial reporting in case of global firms and with high-perceived reputation. The findings are of significance to standard setters and regulators, particularly for emerging economies, like India where companies have international operations. They are equally important for other companies that are based in economies with relatively mature corporate governance mechanisms because of common regulatory focal points.Social implicationsIt brings out the importance of financial reporting process of global corporations for shareholders’ value creation. It is likely to enrich the knowledge and understanding of the EM phenomenon in developing economies like India.Originality/valueIt is an original paper, which highlights the EM motivation about multi-nationality, reputation and related variables in Indian corporate.

The Revised Shareholder Rights Directive 2017: Policy Implications for Workers

The 2017 revised Shareholder Rights Directive gives shareholders a say on executive pay and requires institutional investors to improve shareholder engagement. The directive is thus designed to provide a counterweight to the increasingly dominant ‘shareholder’ model of corporate governance which has put the interests of firms’ shareholders ahead of other stakeholders, including their workers. Drawing on the experience of the UK, Europe’s leading exponent of the shareholder model whose experience heavily influenced the Commission’s thinking, this brief analyses the workings of the directive, discusses its implications for worker’s rights and suggests how trade unions should respond. A frequent criticism of institutional investors, such as mutual and pension funds, is their passivity in influencing the companies they invest in despite the power of exit they hold over them. This has been blamed for short-termism, undermining the trust of workers and fueling excessive executive pay. The directive tries to address these problems by increasing transparency and engagement, and requiring investors to show how their portfolios conform to their long-term investment strategies. Although the directive sets no cap on executive pay it provides shareholders with more control over company policies that include pay. The brief critically examines the effectiveness of these policies, arguing that these do not go far enough and may even be unworkable. The advice for trade unions is to continue pushing on issues such as boardroom pay, particularly the notion that it should be set according to the firm’s share price.

Foundations in the Netherlands: Toward a Diversified Social Model?

This article describes the history, development, and current position of Dutch foundations. In the past, the philanthropy sector and foundations initiated many nonprofit services in the Netherlands. Along with the growth of the welfare state, philanthropy was sidelined. Due to public funding, the pillarized Dutch nonprofit sector extended strongly. However, despite its large scale it shows a special feature. Most nonprofits are still privately governed institutions although publicly funded. In the 1980s, governmental budget cuts forced the nonprofits to embrace the market as income source. A dualistic model got dominancy or state or market. At the end of the 20th century, however, philanthropy revived and a new philanthropy sector emerged. The article addresses the issue of the role of philanthropy in changing (European) welfare states. Are we experiencing further marketization and privatization—toward a so-called Anglo-Saxon shareholder model—or are we seeing a continuation of the so-called Rhineland, multistakeholder model of government, market, and philanthropy?

Governing the Good State Shareholder: The Case of the OECD Guidelines on Corporate Governance of State-Owned Enterprises

The newly revised Guidelines on Corporate Governance of State-Owned Enterprises (2015) by the OECD are fast emerging as a new regulatory paradigm for the administration of State-owned enterprises and the organization of the State ownership function. This article analyses the Guidelines’ policy prescriptions, governance strategies, and integration into global governance. Noting that the instrument operates by governing the shareholder’s internal make-up, decision-making and objective setting, the article argues that the Guidelines amount to a robust model for an ideal State shareholder – the Good State Shareholder. Efficient, engaged, and accountable, the Good State Shareholder emerges as a critical actor in the contemporary global economy, where States continue to amass and command immense shareholder power. However, when juxtaposed with the recent attempts by the UN to adopt State ownership as an instrument of human rights governance, the fault lines of the Good State Shareholder model, as well as the emerging techniques of shareholder governance, are exposed.