We’ve spent time over recent weeks talking about what’s broken with corporate governance. And, generally, the core problems seem to arise from a systemic weak point in the flow of responsibility and authority from owners to managers. It’s worth noting that this isn’t a new concern. As long ago as the early 1930s . . .
No one pays much attention to the actual owners, really, of publicly-held companies. And when they do, it’s usually via a simplistic proxy of one sort or another. The classics are the little old lady who buys “blue chip” stocks for reliable dividend payments, and the frenzied trader looking for rapid growth. There was a time when this characterization made more sense . . .
We briefly reviewed, yesterday, one generally well-known aspect of the anonymity of owners in today’s publicly-held companies – the difficulty of determining who, really, they are, or who are their proxies through whom they own these companies. But that only points to the really key frustration in this equation, the question: What do they want?
The traditional offering of how owners communicate with management is via share price. The idea is that shareholders vote with their dollars, and that the resulting affect on price communicates everything managers need to know about owner intent and interest. That would appear to be entirely appropriate, and certainly consistent with the free-market theory of capitalism of which publicly-held companies are so prominent a part. After all, a vast amount of complex integration is accomplished in robust economies via the simple device of market price. But it is not sufficient to the purpose we put it to . . .
Over the past few days we’ve seen how difficult it can be to identify who really owns today’s publicly-held and traded companies, what they truly want from that ownership, and how they actually communicate that intent and interest. It must be said that, for those of us who argue that the owner’s rights must be given active primacy in the scales of power for corporate governance to function properly, the results of our review do not bode well for that actually happening. . .
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