Archive for June, 2016

Engagement: an eclectic approach

In a paper published in the spring of 2016, (1) Mattew J. Mallow and Jasmin Sethi dip into two opposing views in Corporate Governance, the one advocating to give shareholders as much power as possible to influence directors and management´s decisions, (favoring unclassified boards, frequent voting, ability to change the company`s charter), and the one pushing for keeping the board insulated from them, (opposite recommendations and overall deference to elected directors). (1)

 Bebchhuk (who states that shareholders activism increases firm value) and Strine, (who asserts it only favors short-termism) both rely in empirical studies which are not conclusive.

 Mallow and Sethi introduce “Engagement” in the discussion. Whatever the definition, it refers to some cooperation between board and shareholders or institutional investors´ managrs, and at least an enhanced dynamism in their relationship. Managers are supposed to owe fiduciary duties to final investors in order to maintain the log-term value of the investments. We will herein follow their analysis in several topics: Read more…