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Corporate Governance, Institutional Investors and Conflicts of Interest

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  • C. B. Ingley
  • N. T. Van Der Walt

Abstract

The paper outlines the problems of conflicts of interest for fiduciary shareholders with respect to the stock of publicly owned companies in their portfolios and considers various approaches proposed to address these problems. The questions of whether fiduciary problems are the result of a vacuum of ownership and an imbalance of power, and the extent to which regulatory reform and shareholder activism can resolve these problems, are examined. From this analysis a framework is developed that describes the sources, outcomes and factors contributing to the effectiveness of conflict management in the context of the current investment environment. A series of recommendations for mediating conflicts of interest by changing board architectures are presented. These recommendations apply principles of participative corporate democracy to the overall governance system.

Suggested Citation

  • C. B. Ingley & N. T. Van Der Walt, 2004. "Corporate Governance, Institutional Investors and Conflicts of Interest," Corporate Governance: An International Review, Wiley Blackwell, vol. 12(4), pages 534-551, October.
    • Handle: RePEc:bla:corgov:v:12:y:2004:i:4:p:534-551
    DOI: 10.1111/j.1467-8683.2004.00392.x
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    Cited by:

    1. José V. Frias‐Aceituno & Lazaro Rodriguez‐Ariza & I.M Garcia‐Sanchez, 2013. "The Role of the Board in the Dissemination of Integrated Corporate Social Reporting," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 20(4), pages 219-233, July.
    2. Rachelle Belinga & Blanche Segrestin, 2019. "A conceptual mapping of the logics of institutional investors' corporate governance responsibilities: The case for "custodian" investor stewardship," Post-Print hal-02167819, HAL.
    3. Rachelle Belinga & Blanche Segrestin, 2019. "A conceptual mapping of the logics of institutional investors' corporate governance responsibilities: The case for "custodian" investor stewardship," Post-Print hal-02444756, HAL.
    4. Nooraisah Katmon & Omar Al Farooque, 2017. "Exploring the Impact of Internal Corporate Governance on the Relation Between Disclosure Quality and Earnings Management in the UK Listed Companies," Journal of Business Ethics, Springer, vol. 142(2), pages 345-367, May.
    5. Thierno Amadou Barry & Amine Tarazi & Paul Wachtel, 2019. "Falling under the control of a different type of owner:risk-taking implications for banks," Applied Economics, Taylor & Francis Journals, vol. 51(8), pages 831-847, February.
    6. Marco Fasan & Chiara Mio, 2017. "Fostering Stakeholder Engagement: The Role of Materiality Disclosure in Integrated Reporting," Business Strategy and the Environment, Wiley Blackwell, vol. 26(3), pages 288-305, March.
    7. Dan Zhang & Shiguang Ma & Xiaofei Pan, 2023. "How do institutional investors influence accounting conservatism in China?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S2), pages 2719-2754, June.
    8. Photis Lysandrou & Denitsa Stoyanova, 2007. "The Anachronism of the Voice‐Exit Paradigm: institutional investors and corporate governance in the UK," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1070-1078, November.
    9. Bao, Shuji Rosey & Lewellyn, Krista B., 2017. "Ownership structure and earnings management in emerging markets—An institutionalized agency perspective," International Business Review, Elsevier, vol. 26(5), pages 828-838.
    10. Jose-Manuel Prado-Lorenzo & Isabel-Maria Garcia-Sanchez, 2010. "The Role of the Board of Directors in Disseminating Relevant Information on Greenhouse Gases," Journal of Business Ethics, Springer, vol. 97(3), pages 391-424, December.
    11. AMANDA Sabila Tia & GUNAWAN Nabila Anggun & PUTRI Ifani Heriyanto & SAADAH Kamalah, 2024. "Carbon Emissions Disclosure In Indonesia: The Impact Of Institutional Ownership," Management of Sustainable Development, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 16(1), pages 45-57, June.
    12. Soyon Paek & Jin-Young Kim & Sung Gyun Mun & Chulhee Jun, 2021. "In hotel REITs, are institutional investors beneficial for firm value?," Tourism Economics, , vol. 27(4), pages 820-840, June.
    13. Abinzano, I. & Muga, L. & Santamaria, R., 2017. "Bad company. The indirect effect of differences in corporate governance in the pension plan industry," International Review of Financial Analysis, Elsevier, vol. 54(C), pages 63-75.
    14. S. Certo & Catherine Dalton & Dan Dalton & Richard Lester, 2008. "Boards of Directors’ Self Interest: Expanding for Pay in Corporate Acquisitions?," Journal of Business Ethics, Springer, vol. 77(2), pages 219-230, January.
    15. Othar Kordsachia, 2021. "A risk management perspective on CSR and the marginal cost of debt: empirical evidence from Europe," Review of Managerial Science, Springer, vol. 15(6), pages 1611-1643, August.
    16. Coral Ingley & Jens Mueller & Graeme Cocks, 2011. "The financial crisis, investor activists and corporate strategy: will this mean shareholders in the boardroom?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 15(4), pages 557-587, November.
    17. Rodríguez-Ariza, Lázaro & Frías Aceituno, José V. & García Rubio, Raquel, 2014. "El consejo de administración y las memorias de sostenibilidad," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 17(1), pages 5-16.
    18. Cynthia Clark & Harry Van Buren, 2013. "Compound Conflicts of Interest in the US Proxy System," Journal of Business Ethics, Springer, vol. 116(2), pages 355-371, August.
    19. Aguilera, Ruth V. & Desender, Kurt A. & Kabbach de Castro, Luiz Ricardo, 2011. "A Configurational Approach to Comparative Corporate Governance," Working Papers 11-0103, University of Illinois at Urbana-Champaign, College of Business.
    20. Rachelle Belinga & Blanche Segrestin, 2018. "Principals and stewards? An exploration of the role of institutional investors in corporate governance," Post-Print hal-01791931, HAL.
    21. Jaime F. Lavin & Alejandro A. Montecinos-Pearce, 2021. "ESG Disclosure in an Emerging Market: An Empirical Analysis of the Influence of Board Characteristics and Ownership Structure," Sustainability, MDPI, vol. 13(19), pages 1-20, September.
    22. Ying Schwarte & Ping He, 2024. "The effects of institutional investors and munificence on board chair orientations," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 28(4), pages 1049-1077, December.

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