In thinking through
the problems posed by agency costs within the public corporation, corporate law
academics have turned repeatedly to institutional investors as a potential
solution. The agglomeration of shares within a large investing firm, together
with ongoing cooperation among a large set of such investors, could overcome
the rational apathy the average shareholder has towards participation in
corporate governance. Alternatively, activist investors could exert specific
pressure on isolated companies that have been singled out—like the weakest
animals in the herd—for extended scrutiny and pressure. In these examples, the
institutionalization of investing offers a counterbalance to the power of
management and arguably provides a systematized way of reorienting corporate
governance. These institutional-investor archetypes have, in fact, come to life
since the 1970s and have disrupted the stereotype of the passive investor. But
have we achieved a new and stable corporate governance equilibrium? Or have we
instead ended up with an additional set of agency costs—the separation of ownership
from ownership as well as ownership from control? This program seeks to explore
these questions and assess the developments in the field since the beginning of
the new century.
Business
meeting at program conclusion.