Primacy in Matters of Anglo-American Corporate Policy Formation: Institutional Shareholders v. Boards of Directors

Abstract

The past financial crisis revealed the lack of engagement of institutional shareholders in matters of corporate policy formation. It has been argued that, because of the absence of adequate normative powers, institutional shareholders have not actively engaged with their companies. Conversely, some suggest that shareholders, despite being adequately empowered, do not have enough incentives to monitor managerial performance. That being said, it is generally claimed that boards of directors, due to the lack of shareholder activism, have primacy in matters of corporate decision-making. This essay will analyse the ability of shareholders to control and monitor boards of directors, under the Anglo-American corporate governance framework.

Keywords: Corporate governance, institutional shareholders, boards of directors, corporate decision-making