Shareholder Supremacy Research Articles

A Review of the Role of ESG Performance of Listed Companies on Financial Performance: Theory, Effect, Influencing Factors and Path

With the ongoing evolution of sustainability concepts, ESG has increasingly captured the spotlight in academic discourse. Therefore use citespace software to analyze previous trending in ESG, and sort out their relation by literature review. Results: (1) Scholars mainly use stakeholder theory, resource dependence theory, signal theory, agency theory, shareholder supremacy theory and cost-benefit theory when researching the relationship between the ESG performance and financial performance; (2) Currently, scholars have three perspectives regarding the impact of ESG performance on financial performance: positive relationship, inverse relationship and nonlinear relationship; (3) The ESG performance's influencing factors on financial performance are primarily reflected like the enterprise, geographical location; (4) When enterprises fulfil their ESG-related responsibilities, they mainly affect their financial performance through four paths: reducing information asymmetry, improving corporate innovation ability, increasing media attention and reducing the tax burden.

ESG and Managerial Agency Problems

Criticism of conventional shareholder supremacy triggered urges for incorporating the stakeholder perspective and the Environmental(E), Social(S) and Governance(G) issues in managerial decisions. However, the corporations in Korea still lack proper corporate governance to protect shareholder benefits from managerial agency problems. In that case, adopting vague, not readily assessable objectives may lead to a lack of managerial accountability and exacerbate the agency problem. We find that Tobin’s Q of firms without good governance declined when their environmental and social ratings improved, suggesting “E,” “S,” and “G” are not independent. Corporations should prioritize establishing

Good Corp, Bad Corp, and the Rise of B Corps: How Market Incumbents’ Diverse Responses Reinvigorate Challengers

Social movements challenge incumbents and drive institutional change by introducing market alternatives—new products and organizational forms that embody an alternative institutional logic. Research has shown that in response to market alternatives, incumbents resist through heterogeneous behaviors: incumbents maintain their commitment to the dominant logic, effectively marginalizing challengers, while also ostensibly endorsing the alternative logic and often successfully coopting challengers. Although incumbents’ strategic responses to pioneering market alternatives are well documented, we do not know how their heterogeneous behaviors affect new waves of challenger mobilization and how these mobilizations may differently address the hazards of cooptation and marginalization. We investigate the rise of the B Corp (Certified B Corporation) movement against the backdrop of both ongoing shareholder supremacy and rising corporate social responsibility (CSR) among incumbent corporations. Our multi-method, multi-stage investigation reveals that heterogeneous incumbent behaviors encourage new waves of challenger mobilization by seeding divergent mobilizing frames. This variety can lead to a paradoxical form of mobilization in which challengers dynamically balance the tension between their movements’ focus on expansion and purity, rather than prioritizing one over the other. The B Corp movement demonstrates how achieving this balance may help challengers avoid cooptation or marginalization, sustain their challenge against incumbents, and achieve more-transformative change. For incumbents, our findings show that both resistance to and the ostensible embrace of alternative logics may stave off immediate challenges but can also invigorate future challenges that pose substantive threats to the dominant logic.

Shareholder Value is No Longer Everything

The topic of this article was borrowed from the statement issued by the Business Roundtable of the USA, in 2019, emphasizing that companies must invest in their employees, protect the environment and deal fairly and ethically with their suppliers. They stated that the focus on advancing only shareholder interest needed to be changed. Last year (2020), marked the celebration of the fiftieth anniversary of Milton Friedman’s statement regarding the role of a corporate. In terms of his statement, the social responsibility of business is to increase its profits and managers are supposed to conduct their businesses in accordance with the owners’ ideas. This proposition presented by Milton Friedman is very similar to the Agency theory which advocates shareholder supremacy. The Agency theory has received prominent attention in discussions pertaining to the theoretical frameworks of corporate governance regimes. After half a century since Milton Friedman’s proposition, there are now arguments, as mentioned above, that this narrow ‘stockholder-centered theory’ has led to severe costs to society. There is a growing consensus for the redirection of corporate objectives towards more purpose-driven principles that will protect the interests of all stakeholders. These opinions are applicable to all body corporates irrespective of the nature of their businesses. In the said context, this article will emphasize the importance of redefining the institutional purpose of financial entities, which is being seen as increasingly significant in rapidly evolving corporate orthodoxy.

Comparative Studies between UK-Listed and Japan-Listed Banks

Abstract This paper studies (i) the effects of external directors and managerial ownership, and (ii) the effects of shareholder monitoring, on risk-taking at banks. The former is part of the internal control mechanisms, the latter of external control. It also examines the difference between control mechanisms in the UK and in Japan. It shows that shareholder supremacy is likely to weaken corporate governance at banks. In particular, it finds that: (i) the substituted effects between internal and external controls differ between countries, or that the substituted effects of governance mechanisms may not exist; (ii) an internal corporate governance approach to shareholder supremacy increases risk-taking at banks; and (iii) foreign shareholders are likely to increase risk-taking at banks.

A Welcome Shift Away from Shareholder Supremacy - Significance of the US Business Roundtable New Statement in August 2019

A Welcome Shift Away from Shareholder Supremacy - Significance of the US Business Roundtable New Statement in August 2019

SHAREHOLDER ACTIVISM AND CORPORATE SOCIAL RESPONSIBILITY IN MALAYSIA - HİSSEDAR AKTİVİZMASI VE MALEZYA'DA KURUMSAL SOSYAL SORUMLULUK

The purpose of this paper is to shed light on the issues of shareholder activism in Malaysia. The findings shows that shareholder activism already taken place in Malaysia. Although, it is not as rigorously and actively as compare to developed country, the existence of shareholder activism in Malaysia indicated the awareness is rising. Shareholder activism is one of the vital element in corporate governance framework to ensure good governance practice. By engaging company, shareholders ensuring there is a check and balance on the course of action taken by company. Furthermore, the research outcome also indicates shareholders are likely to use voting rights and dialogue in engaging companies to practice good CSR. Voting rights is considered as powerful means because voted resolution shows the will of the shareholder. Additionally, dialogue can enhance transparency and openness between shareholders and management of company. Besides, through dialogue, shareholders may signal to the management of the company on the importance of CSR, instead of shareholder supremacy. Having two way communication can improve mutual understanding between both parties and indicate good corporate governance.

Japan’s Corporate Governance Code From the Perspective of ‘Sustainable Growth of the Company and Improvement of Medium- to Long-Term Corporate Value’

Japan’s Corporate Governance Code From the Perspective of ‘Sustainable Growth of the Company and Improvement of Medium- to Long-Term Corporate Value’

The Power of Non-Controlling Stake: Below-Parity Representation of Employees on Corporate Boards

We discuss the potential for below-parity employee representation in the board of directors by analyzing the workers’ choice to adopt this mechanism of employee voice when employee board representation is optional and employees are granted only a minor share of board seats. Combining the stakeholder and institutional theory we reason that, under shareholder supremacy, the effectiveness of this mechanism and, consequently, the utility that the employees gain from board representation will be higher when workers hold firm-specific human capital, and in the presence of institutions that legitimize employees’ voice and consequently corroborate their influence on board. We conjecture how these factors vary with region, firm and worker characteristics. We test our propositions using the Danish employer-employee linked data for public and private firms.

‘Shareholder Supremacy in a Nexus of Contracts: A Nexus of Problems’

This article focuses on shareholder supremacy and exclusivity derived from a view of the company as a nexus of contracts. The nexus of contracts theory is the dominant theory within English company law. It defines the company as a contract between private individuals. The shareholders and the company are recognized as the only parties to that contract. While corporate membership is reserved exclusively for shareholders, the rest of the stakeholders are viewed as external to the company. The article will question the theoretical and doctrinal validity of shareholder supremacy and exclusivity within this context. It argues that while the nexus of contracts theory promotes shareholder exclusivity in a rather dogmatic manner, not only the law but also the courts have limited the rights of shareholders to a significant extent. The article does not place into doubt the importance of shareholders within the corporate context; after all the shareholders are the capital providers of the company. It does however criticize the current status quo in English company law where theoretically the shareholders are sitting on the corporate throne in a company which includes no one else but them, but in practice their supremacy is challenged by the courts to such a degree that it is difficult to exercise even the rights stemming from their shares and to have access to effective remedies against managerial abuse. The article will therefore underline the controversies inherent in the nexus of contracts theory. It will shed light on the distorted application of the theory within English company law. It argues that the theory should be reformed to adjust to the new reality. On the one hand, it should certainly protect the rights of shareholders stemming from their shares and it should allow for effective shareholder protection against mismanagement. On the other hand, the theory should adopt a more inclusive definition of the company that will not leave the stakeholders off its context. Especially those stakeholders who clearly have a contractual relationship with the company should be factored into corporate governance. Therefore, the article will argue against the doctrinal dominance of shareholder exclusivity and supremacy by arguing that they nowadays flow from a flawed interpretation of the nexus of contracts theory. The article will focus on shareholder protection; it will examine section 994 of the Companies Act 2006, which provides for one of the main remedies against directorial abuse. The jurisprudence of the courts embodies a clear mismatch between theory and practice. Absolute shareholder supremacy should have entailed an enhanced level of protection to match the status of shareholders as the only members of the company. After all, the nexus of contracts theory defines the interests of the company as the interests of the shareholders. Yet, the judicial stance on this matter proves that the courts have actually curtailed the protection granted to shareholders by the Companies Act 2006; this clearly testifies to the deeply problematic nature of shareholder supremacy within the context of the nexus of contracts theory. The article will therefore argue that the dominant views in theory, academia and law, which continue to recognize a notion of absolute shareholder supremacy and exclusivity, flow mostly from ideology rather than reality. Ideological dogmatism has resulted in a very narrow, and in many ways distorted, definition of the company; one which left only the shareholders within its context albeit and paradoxically with a limited set of rights to control the management. The article argues that the current law should be reformed, aiming at creating a more inclusive company where shareholders would actually enjoy a bundle of rights appropriate for capital providers. The law should also be reformed so that stakeholders whose interests are integrally linked with the company’s fortune – such as employees and creditors – should be factored into the company. This is in the interests of both the company and the stakeholders

Directors' Social Identifications and Board Tasks: Evidence from Finland

Manuscript Type Empirical Research Question/Issue Scholars and practitioners have been interested in the tasks of boards of directors, yet we know relatively little about the impact of directors' social identification on their engagement in specific board tasks. Examining the 92 largest Finnish industrial organizations, we explore how the directors' identification with the organization, its shareholders, and customers affects the extent to which the board engages in external legitimacy, networking, advice and counsel, top management monitoring, financial monitoring, strategic participation, and strategic evaluation tasks. Research Findings/Insights Following the social identity perspective, we provide new insight to understand the relationship between board tasks and the directors' relevant identifications. We find that organizational identification is positively related to the level of board task involvement. We also discover that shareholder identification is negatively related to strategic participation tasks and only weakly related to other board tasks. Theoretical/Academic Implications We contribute to the present literature on boards of directors by applying an empirical, analytical lens to theories on how and why directors engage in board tasks. In particular, we show that different social identifications of the directors have different explanatory power towards the subsets of resource provision and monitoring tasks. Practitioner/Policy Implications Our findings suggest a re-evaluation of the shareholder supremacy view as the only driver of value creation for the organization. Additionally, we advocate that board, organization, and industry characteristics are similarly weak in predicting the involvement of the directors in the board tasks examined.

The Legislative Response to the Shareholders V Stakeholders Debate: A Comparative Overview

The debate as to whose interests should be considered by directors in terms of their duty to act in the best interests of the corporation—shareholders or stakeholders—has been popular among corporate law scholars for a number of years. In some jurisdictions the judiciary indicated a willingness to depart from a strict shareholder-centric approach by recognising that the interests of creditors become paramount under certain circumstances. Until relatively recently the legislature remained silent on this topic. However, corporate law reform afforded the legislature an opportunity to revisit this debate in at least four common law jurisdictions—Australia, the UK, South Africa and Singapore. This article provides a comparative overview and analysis of relevant legislation in these jurisdictions to illustrate the extent to which, if at all, the legislatures in these jurisdictions have been persuaded to depart from the notion of shareholder supremacy and ultimately assesses the implications of a particular approach adopted by the respective legislatures.

Upper Echelons as a Link between Corporate Social Responsibility and Positive Financial Performance

Using Upper Echelons theory, we develop a theoretical model that argues that CEOs have been conditioned to overlook information that might allow firms to pursue strategies that are both socially responsible and shareholder wealth maximizing. Namely, CEOs of the recent past have been over-indoctrinated in the mindset of shareholder supremacy, agency theory, and related thinking. As a result, their cognitive base, reflecting Upper Echelons thinking, filters out information related to certain social responsibilities and stakeholder groups, even when pursuit of that information might lead to positive economic benefits. By expanding their field of view and explicitly allowing consideration of information related to corporate social responsibility, we argue that firms will discover a number of opportunities that can provide both positive social and positive financial outcomes. We also identify several factors that should allow for such an expanded field of view.

Between Profit-Seeking and Prosociality: Corporate Social Responsibility as Derridean Supplement

This article revolves around the debate surrounding the lack of a coherent definition for corporate social responsibility (CSR). I make use of Jacques Derrida’s theorizing on contested meaning to argue that CSR’s ambiguity is actually necessary in light of its functional role as a “supplement” to corporate profit-seeking. As a discourse that refuses to conclusively resolve the tension between profit-seeking and prosociality, CSR expresses an important critical perspective which demands that firms act responsibly, while retaining the overall corporate frame of shareholder supremacy. CSR does this by ambivalently affirming both profit-seeking and prosociality, a necessary contradiction. Attempts to reduce CSR’s ambiguity can thus only succeed by undermining its viability as a normative discourse that captures how certain elements of society understand how firms should act. The analysis suggests that greater scholarly attention is needed with regard to the material discursive environments within which discourses such as CSR are deployed. A discursive approach to research could thus benefit future practitioners, who have to act according to fluid standards of responsibility that cannot be authoritatively defined, but which can be better understood than they are at present.

Whose Interests Should the Managers Serve? – Insights from Recent Korean Cases on LBO Transactions

It has long been debated whose interest the manager of a company should serve. Many scholars including those who belong to the “law and economics” school argued that the only purpose of a company is the maximization of the shareholder value. An alternative thinking, or “stakeholder” model, argued that the manager may, or even should, consider the interest of other stakeholders such as employees, creditors, community, suppliers and customers. In Korea, this debate has been framed under the doctrine that the directors owe duties toward “the corporation itself.” Although this doctrine (or rhetoric) may sound logical as direct deduction from the concept of “separate legal personality,” it does not provide the ultimate answer to the real question – whose interests the managers should serve. It became a serious issue in a few recent Korean Supreme Court cases involving LBO transactions. In a criminal case in 2006, the defendant, who was the 100% owner of an SPC, became CEO of the company after the SPC acquired majority shares of the target. The SPC financed the acquisition by from banks and the provided its asset as collateral in favor of the SPC. The SPC did not default on the and the target’s performance became significantly better after the acquisition, satisfying all the shareholders and creditors of the target. The Supreme Court, however, held that the defendant was guilty of criminal breach of trust because, by causing the to provide its asset as collateral in favor of its majority shareholder, he jeopardized the “corporation itself.” Similar reasoning is found in many other court cases in Korea. Other forms of LBO transactions designed for debt push-down, such as a merger of the with the SPC or capital reduction following borrowings at the level, were challeged as criminal breach of trust because they harmed the target itself. The author argues that the formalistic understanding of the legal personality maintained by the Korean courts does not provide the right answer to our question. At the same time, however, the author does not believe that such formalistic understanding should be completely replaced with the shareholder supremacy theory, since it has some value that shareholder supremacists often miss. The author claims that the stakeholder model helps us explain and critically analyze the “corporation itself” doctrine held by the Korean courts, without entirely kicking out some value this apparently clumsy doctrine has. Under the stakeholder model, we can clarify the legitimate limit of the LBO transaction and distributions to the shareholders.

Corporate Governance after the Death of the King the Origins of the Separation of Powers in Companies

The separation of power in companies can be traced back to the sovereignty of the Kings. It first entered the stage with the chartered companies like the British East India Company. Their governance structure was based on the dualism of private investors and governors installed by the monarch. Companies survived the rise of democracy and demise of monarchy ensuing the age of enlightenment. They rose to glory in the modern world. Large listed companies are still are managed by independent entrepreneurial officers. But who took the place of the good king watching over them? The fall of the thrones left a vacuum here. This lies at the bottom of the debate on shareholder vs. stakeholder supremacy. If we understand history, we might see new ways to answer for whose benefit the company should be governed.

Ouverture de ‘Corporate Governance Communication’

The globalisation of the market and the growth of companies into increasingly complex and ramified networks underline the importance of communication and of the information flows that sustain relations between a company’s executive organ, its management, shareholders and other stakeholders. In a complex framework of relationships, corporate governance communication and information are of prime importance to manage consensus in organisations operating on global markets. We can identify three main approaches in the debate on corporate governance communication. The first typically focuses on the shareholder supremacy of corporate policies. This approach in today’s global markets it often finds concrete implementation in companies operating in conditions of competitive scarcity (typical examples of this are corporations operating in oil extraction, energy and similar markets). The second approach refers to the balance between shareholder supremacy and stakeholder interest. In today’s global markets, this policy emerges in conditions of controlled competition, where corporate governance reveals a management power that is absolutely not subordinated to the shareholders. And finally, the third corporate governance policy concerns the conduct of organisations operating with a stakeholder supremacy. This approach is quite recent, developing in the early 1980s due to the globalisation of the markets of large corporations, which introduced networking logics into their corporate policies, tackling new problems of economic and environmental sustainability, with the result that new needs related to more heterogeneous and complex classes of stakeholders have emerged.

Hybrid Corporate Governance and its Effects on Innovation: A Case Study of AstraZeneca

This case study looks at the relationship between the UK/Swedish pharmaceuticalfirm, AstraZeneca, and its shareholders from the point of view of its effects oninnovation. It uses a theoretical framework on corporate governance and innovationthat differentiates sectors according to the novelty, visibility and appropriability oftechnological change. High novelty requires a corporate governance system withstrong industry-specific expertise; low visibility requires good firm-specific perceptiveness.High appropriability favours shareholder supremacy as against stakeholderinclusion. The pharmaceutical industry appears to be high in all three, and this(according to accepted stereotypes) should favour the outsider-dominated corporategovernance system of the UK as against the insider-dominated Swedish system. It isfound that the corporate governance that resulted from the merger could indeed bedescribed as hybrid, but that (following the building up of one major US shareholding)it was a UK/Swedish/US hybrid. In spite of the apparent similarity of the UKand US ‘outsider-dominated’ systems, the US element made a crucial difference, ingiving engagement by a strong and well-informed shareholder who had someinfluence on other shareholders. This in turn helped to protect the firm to a significantextent from short-term pressures within the UK stock market, and thus to allow itto maintain its emphasis on long-term innovation.

A Challenge to Shareholder Supremacy in the Public Firm

A Challenge to Shareholder Supremacy in the Public Firm