Shareholders Harmed by Regulation of Corporate Governance
12 February 2004
SUGGESTED
Monetary Policy
Keep interest rates unchanged for the moment but increase them within the next three months was the conclusion of the iea's Shadow Monetary Policy Committee (SMPC), the long standing group of distinguished economists, at its January meeting.
30 January 2004
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The current planning system satisfies nobody and should be privatised, argues John Corkindale, former economic advisor to the Department of the Environment and author of The Land Use Planning System, Evaluating Options for Reform.
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Lifestyle Economics
15 November 2024
For Immediate Release. Stakeholder models of corporate governance should be opposed, argues Dr Elaine Sternberg, author of Corporate Governance: Accountability in the Marketplace, the latest paper from the iea.
In this robust and comprehensively free-market defence of Anglo-American systems of corporate governance, the author argues that stakeholder models allow management and governments to run companies in their own interests.
Starting with a clear explanation of what corporate governance is, Sternberg demonstrates why the stakeholder, German and Japanese models are less capable than the Anglo-American model of achieving good corporate governance. She shows how, and why, regulation to improve corporate governance is typically counterproductive.
Properly understood, corporate governance consists of ways of keeping corporate actions, agents and assets tied to the corporate objectives; those objectives are the definitive ends established by the corporation’s owners, its shareholders.
Whereas the Anglo-American model promotes achievement of the corporate objectives, and accountability to shareholders, the German and Japanese models are designed and used for different purposes.
The stakeholder model is incompatible with business and all substantive corporate ends. Incoherent and unjustified, it fundamentally undermines agency, accountability and property rights.
The way to improve corporate governance is to bring Anglo-American practice into line with the Anglo-American theory, by freeing shareholders from regulatory obstacles, and allowing them to choose how best to hold their corporations to account.
What is needed is a genuine market for corporate control, in which companies can compete for shareholders, and investment managers for funds, in part on the degree and kinds of accountability they afford to owners.
Read the full paper here.
Starting with a clear explanation of what corporate governance is, Sternberg demonstrates why the stakeholder, German and Japanese models are less capable than the Anglo-American model of achieving good corporate governance. She shows how, and why, regulation to improve corporate governance is typically counterproductive.
Properly understood, corporate governance consists of ways of keeping corporate actions, agents and assets tied to the corporate objectives; those objectives are the definitive ends established by the corporation’s owners, its shareholders.
Whereas the Anglo-American model promotes achievement of the corporate objectives, and accountability to shareholders, the German and Japanese models are designed and used for different purposes.
The stakeholder model is incompatible with business and all substantive corporate ends. Incoherent and unjustified, it fundamentally undermines agency, accountability and property rights.
The way to improve corporate governance is to bring Anglo-American practice into line with the Anglo-American theory, by freeing shareholders from regulatory obstacles, and allowing them to choose how best to hold their corporations to account.
What is needed is a genuine market for corporate control, in which companies can compete for shareholders, and investment managers for funds, in part on the degree and kinds of accountability they afford to owners.
Read the full paper here.
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