Ownership and influence : the debate about shareholder influence on listed companies
This thesis addresses the long-standing debate about the ability of investors in public listed companies to significantly influence or even control certain aspects of board and management decision taking. Much of the recent interest in these issues has focused on increased public disclosure of boardroom practices and standards. In contrast, my research shows that informal relationships between companies and their major shareholders are playing an increasingly important role in influencing key aspects of corporate strategy, major financing and investment decisions, and board membership. The research was undertaken through: an analysis of the investment portfolios of the 50 largest fund managers investing in the shares of UK companies and the ownership of 297 of the UK's largest listed companies; in-depth interviews with 120 companies, fund managers and others concerned with the quality and regulation of company shareholder relationships and information flows; and studying the role of fund managers and other shareholders in the resignations of the CEOs of 24 case history companies. The growing importance of informal mechanisms of fund manager influence and networking means that shareholder influence no longer depends on the formation of coalitions of the size proposed by Scott, or the alignment of interests through formally constituted Shareholder Protection Committees. A model of 'extended ownership' describes how effective control may pass to the fund manager with the largest, but still sub-minority, shareholding It is also crucial to understand that investment decisions by fund managers are influenced by and related to a wide range of company and investor-specific factors. These are described and the impact of their interactions on shareholder behaviour discussed. This thesis is relevant to the current debate about the public role that should be taken by institutional fund mangers in the process of corporate governance. Models of investor behaviour which assume that fund managers are a homogenous investor type or which do not take into account the key role of informal influence mechanisms are therefore of limited value.