Voice: the perspective of Minority Shareholders

In firms with concentrated structure, (be it because of the economic stake or as a result of multiple-share capital structures, or as a result of the retail shareholders´apathy), the fact that controlling shareholders can extract private benefits from other shareholders, who still remain passive is appealing, and constitutes the theme for Dov Solomon´s “The voice: the minority shareholder´s perspective”, published in May 2017, (1).


Rational apathy (2) has been identified as a main factor for the passive attitude, and measures addressing it try to (i) increase the benefits arising from participating and voting: rising the influence in the voting outcome pushing institutional investors to vote; (ii) decrease the costs of voting, introducing online voting for instance. If voting reality improved, all other activism tools would be enhanced also, thus its relevance. Read more…

Controlled Companies and Independent Directors

Lucien Bebchuk and Assaf Hamdani have recently published an article, (1) in which they present an alternative to current director elections so that true independence is assured, in particular at controlled companies, where beyond the fact that Nomination Committees are responsible for the selection, controller shareholders usually de facto fully control the procedures so that independence does no actually happen, (as it may be thought to be the case at widely held companies).

Enhanced Independence (as they call it) may emerge if directors are held accountable by public investors; Bebchuk and Hamdani think that not only controller shareholders are to be dispossessed of their complete influence in the nomination process, but that some influence must be granted to public investors, at least regarding some of the independent directors. Their influence can be executed in appointment, reelection and termination decisions.

Bebchuk and Hamdani state that even with director nomination restricted to Nomination Committees populated only with independent directors, controller shareholders have a big say in the process. Independent directors cannot be elected or reelected without their decisive voting rights as shareholders, and also find it difficult to remain when controlling shareholders leave the company. Apart from the social gratitude stemming from having been elected, directors very often suffer the direct or indirect, explicit or not pressure from controller shareholders regarding decisions that affect them and value, particularly related-party transactions. Read more…

Corporate Governance and the Sharing Economy

In a world of robots interacting with humans and learning out of the process, while connected with all other robots in a network; in a world of artificial intelligence, disruptive technologies and new business models arising from them; in this world regulation starts to change: why do we need CFA`s in a world where financial advise is produced with algorithms? In this world firms also start to reject IPOs fearing their innovation capacities would fade away, (Uber, Airbnb, …), or introduce dual-class share systems to keep control on it and the long-term perspective.

Mark Fenwick and Erik P.M. Vermeulen in a paper called “How the Sharing Economy is Transforming “Corporate Governance”, (1) refer to the new changes Corporate Governance faces and needs if boards are to gather survival and success for their companies.

For them what is relevant is whether these new big companies are able to develop a system that is inclusive of all stakeholders, (shareholders interests, oversight, and other currently accepted needs fall apart).

Screenshot - 14_05_2017 , 21_05_35

(Source (1)) Read more…

How to conquer a rational long-term growth path, by Juan María Nin.

With a Neo-Austrian economic background and a deep knowledge of the roots of the Great Recession started in 2008, (dated well before though) Juan María Nin explains in his recently published book, titled “For a rational (economic) growth” and subtitled “From the Great Recession to Stagnation: Solutions to compete un a Digital World”(1), his recommendations for structural change. He states thar our economies need to escape from the current low-growth or recession situation and from the institutions and structures that generated it since we accepted: (i) A money generation monopoly by Central banks or similar institutions, (Fed); (ii) a fractionary reserve banking system and the subsequent working capital structural deficit in the banking industry; (iii) a monetary policy-led constant inflationary pressure, the bubbles arising from them, and the banking failures emerging from them; (iv) the necessary last resort lender role of central banks and the public support when things go bad for the private bank balances, (v) a tacit agreement in exchange for the loans granted to the public sector in his unstoppable growth path.

He suggests some structural and institutional changes if a rational path for growth not blindly based in debt, inflation and low interest rates is to be pursued: Read more…

Economic consequences of Shareholder Value Maximization (SVM)

Insead has recently published a short article (1) in which they try to draft the economic consequences of the SVM principle first made explicit by Milton Friedman. (2)

I will here only made some brief comments on several statements that I consider not rigorously introduced. Read more…

Corporate Governance Challenges in Controlled companies. USA versus EU

March 30, 2017 1 comment

Corporate Governance Challenges in Controlled companies. USA versus EU

María Gutiérrez and Maribel Saéz have recently published an enlightening article on this aspect of Corporate Governance, traditionally much more connected with the European reality than with the US case. (1)


Their analysis covers the three mechanisms with which shareholders may react to underperforming companies, (exit, voice and loyalty or liability (2)), with an innovative approach; they understand their respective effectiveness depends on the type of controlling insider and on the nature of the outsider.  Controlling shareholders have been more common on Europe and other areas than in the US, although in recent times both the reduction of public firms and certain governance practices (dual-class shares…) have made them also more frequent in the US. Even if reality appears to converge, nevertheless governance practices differ as for the treatment that controlling shareholders receive, so that tunneling, self dealing and other rent-extraction methods by them against the minority shareholders or investors is still much more limited in the US than in Europe, (perhaps one of the reasons for the much more limited role of capital markets there). Read more…

The US Corporate Governance Framework

Literature on Corporate Governance (Corpgov) often comes from the US; many Corpgov institutions have been born in the US; the big controversies regarding board effectiveness, executive pay, and any other Corpgov matter are often raised in the US…..but what is the Corpgov framework in the US? I have ofter read about the US Corpgov without having a systemic knowledge about the framework that defines it. I will try to learn and offer a view of that in the present post. (1)


The era after SOX (Sarbanes Oxley Act in 2002) unveils differences between the USA Corpgov system, (regulatory or hard law and “one size fits all” regime) and the UK one, (based on soft law or codes, and the “Comply or Explain” principle). Differences also affect gatekeepers, (subject to regulation by Agencies such as the SEC) and the market for corporate control.


  1. Peter V. Letsou describes the shared regulatory responsibility in the USA by the States and the Federal Government.

Read more…