ISBEE Working Paper
15 Pages Posted: 27 May 2004
Date Written: May 26, 2004
This paper identifies eight reasons why it is rational not to trust large complex Anglo corporations and how these reasons could be removed. First, directors are overloaded with information. Second, directors lack information independent of management to evaluate management and the business. Third, directors are irresponsible as they lack systemic processes to discover when their trust in management might be misplaced. Fourth, directors are given absolute power to legally act unethically in managing their own conflicts of interest. Fifth, dominant shareholders can unfairly extract value through related party transactions. Six, directors can be impotent to act alone and seventh, group loyalty constrains whistle blowing on expropriation by colleagues. Eight, shares can be manipulated and traded covertly. All eight concerns can be removed without any changes in the law by changing corporate constitutions to establish a watchdog board, elect directors by cumulative voting, establish stakeholder councils and introducing sunlight share trading.
Keywords: Conflicts, Cumulative voting, Directors, Governance, Power, Shareholders, Stakeholders Councils, Sunlight trading, Trust, Watchdog board
JEL Classification: D72, D74, D82, G38, K22, L29
Suggested Citation: Suggested Citation
Turnbull, Shann, Why Anglo Corporations are Irresponsible, Unethical and Should Not Be Trusted: And How These Problems Can Be Corrected (May 26, 2004). ISBEE Working Paper. Available at SSRN: https://ssrn.com/abstract=550662 or http://dx.doi.org/10.2139/ssrn.550662