Corporate Governance, Institutional Investors and Conflicts of Interest

• Published in: Corporate governance : an international review Vol. 12; no. 4; pp. 534 - 551
• Main Authors: Ingley, C. B., Van Der Walt, N. T.
• Format: Journal Article
• Language: English
• Published: Oxford, UK Blackwell Publishing Ltd 01.10.2004; Wiley Blackwell
• Series: Corporate Governance: An International Review
• Subjects: agency problem; board architecture; Boards of directors; Conflicts of interest; Corporate governance; Ethics; Fiduciary standards; Institutions; Investment; Management science; mediating hierarch; Quality standards; Regulatory reform; shareholder power; Stakeholder; stakeholders; Strategic management; Studies; United States > US
• ISSN: 0964-8410; 1467-8683
• DOI: 10.1111/j.1467-8683.2004.00392.x

The paper outlines the problems of conflicts of interest for fiduciary shareholders with respect to the stock of publicly owned companies in their portfolios and considers various approaches proposed to address these problems. The questions of whether fiduciary problems are the result of a vacuum of ownership and an imbalance of power, and the extent to which regulatory reform and shareholder activism can resolve these problems, are examined. From this analysis a framework is developed that describes the sources, outcomes and factors contributing to the effectiveness of conflict management in the context of the current investment environment. A series of recommendations for mediating conflicts of interest by changing board architectures are presented. These recommendations apply principles of participative corporate democracy to the overall governance system.