Rethinking Assumptions Behind Corporate Governance

Blair, Margaret M.
November 1995
Challenge (05775132);Nov/Dec95, Vol. 38 Issue 6, p12
The article focuses on trends in corporate governance. Maximizing shareholder wealth has increasingly become the most important objective of corporate management, especially in an age of aggressive corporate acquisitions and the rising power of institutional investors. In large publicly traded corporations, property rights are routinely unbundled and carved up among the many participants in the corporate enterprise. The reason is that in the context of large industrial organizations, there are important efficiency advantages from dividing up these ownership rights. Day-to-day decision making is turned over to hired managers, who are not typically significant owners of the business but have much better and more detailed information than do shareholders about the operations of the firm. But as the private property axiom would suggest, governance problems arise as soon as decisions are made and control rights are exercised by parties who do not bear all the risk associated with the use of the assets.


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