Concentrated Ownership, Socio-emotional Wealth and the 'Third Possibility': Bringing Society Back In

Forthcoming in volume (Volume 74) “The Corporation: Rethinking the Iconic Form of Business Organization” of Research in the Sociology of Organizations

32 Pages Posted: 19 Apr 2021 Last revised: 30 Apr 2021

See all articles by Loizos Heracleous

Loizos Heracleous

Warwick Business School

Luh Luh Lan

National University of Singapore (NUS) - Faculty of Law; National University of Singapore - Department of Strategy & Policy; European Corporate Governance Institute (ECGI)

Date Written: January 22, 2021

Abstract

Concentrated ownership implies greater alignment between ownership and control, mitigating the agency problem. However it may also engender governance challenges such as funds appropriation through related party transactions and the oppression of minority shareholders, especially in the context of weak legal systems. We draw from legal theory (the tradeoff controlling shareholder model and private benefits of control) and from organization theory (socioemotional wealth), to suggest that concentrated ownership can be beneficial in both robust and weak legal systems for different reasons. We advance theory on the effects of controlling shareholders and suggest that the longer-term outlook associated with engaged concentrated ownership can aid the shift of the corporation towards Berle and Means’ (1932: 355) “third possibility” of corporations serving the interests of not just the stockholders or management but also of society.

Keywords: Corporate governance, concentrated ownership, socio-emotional wealth, legal theory

Suggested Citation

Heracleous, Loizos and Lan, Luh Luh, Concentrated Ownership, Socio-emotional Wealth and the 'Third Possibility': Bringing Society Back In (January 22, 2021). Forthcoming in volume (Volume 74) “The Corporation: Rethinking the Iconic Form of Business Organization” of Research in the Sociology of Organizations, Available at SSRN: https://ssrn.com/abstract=3827890

Loizos Heracleous

Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Luh Luh Lan (Contact Author)

National University of Singapore (NUS) - Faculty of Law ( email )

469G Bukit Timah Road
Eu Tong Sen Building
Singapore, 259776
Singapore

National University of Singapore - Department of Strategy & Policy ( email )

15 Kent Ridge Drive, Singapore
Singapore 119245
Singapore

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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