Institutional Investors, the Political Economy of Corporate Disclosure, and the Market for Corporate Environmental and Social Responsibility: Implications from the UK Companies Act (2006)

44 Pages Posted: 22 Apr 2008 Last revised: 13 Apr 2010

See all articles by Gordon L. Clark

Gordon L. Clark

Oxford University - Smith School of Enterprise and the Environment

Eric R. W. Knight

University of Sydney Business School

Abstract

Shareholder scrutiny of reported income and stock price appreciation, nongovernmental organisations, activists, and the public-at-large hold large firms accountable on many issues including their environmental footprints and the social standards of their suppliers around the world. For those coming from European social democratic traditions, stakeholders have a legitimate voice in the affairs of the corporation especially in two-tiered governance regimes that separate supervision from management. Notwithstanding attempts to re-write their proper roles and responsibilities, the Anglo-American corporation is widely believed to be the medium for the accumulation of shareholder value. Recently, however, a counter-argument has emerged suggesting that the UK Companies Act of 2006 broke with this tradition to embrace the European model if not wholly then at least in terms of giving legitimate voice to social and environmental issues. We note that the UK Companies Act owes much to the EU Modernisation Directive but argue that the disclosure of social and environmental factors relevant to understanding the risks faced by the corporation owes more to the interests of institutional investors than community activism. We also suggest that there remains deep-seated divisions amongst institutional investors (especially different types of pension funds) that may have long-term consequences for UK disclosure policy and the power of markets to affect corporate social and environmental responsibility.

Keywords: Disclosure, institutional investors, UK company policy, social and environmental standards

JEL Classification: D23, G18, G23

Suggested Citation

Clark, Gordon L. and Knight, Eric R. W., Institutional Investors, the Political Economy of Corporate Disclosure, and the Market for Corporate Environmental and Social Responsibility: Implications from the UK Companies Act (2006). 2008 Industry Studies Conference Paper. Available at SSRN: https://ssrn.com/abstract=1123550 or http://dx.doi.org/10.2139/ssrn.1123550

Gordon L. Clark (Contact Author)

Oxford University - Smith School of Enterprise and the Environment ( email )

South Parks Road
Oxford, OX1 3QY
United Kingdom
+44 1865 285197 (Phone)
+44 1865 285073 (Fax)

HOME PAGE: http://www.geog.ox.ac.uk/staff/glclark.html

Eric R. W. Knight

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

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