Two Easy Actions to Improve Your Corporate Governance
Article by IESE Prof. Pascual Berrone
The global financial crisis revealed severe shortcomings in corporate governance, fueling debate on the responsibility of governance mechanisms and structures in promoting or preventing future collapses.
IESE's Pascual Berrone and Dionosio Garcia-Piriz analyze current systems and make recommendations for new governance policies in their chapter, "Will You Keep an Eye on My Investment? An Empirical Analysis of the Link Between Institutional Investors and Boards of Directors," which was published in Governance in Action Globally (Oxford: RossiSmith, 2013).
One of the basic assumptions of corporate governance is that the board's main purpose is to defend the interests of shareholders.
Interviews and surveys were conducted with institutional investors and board chairs from Spanish publicly traded firms to test the validity of this assumption.
Institutional investors were chosen because they represent the major owners of equity in corporations, while board chairs were chosen because, being at the apex of the organization, they are the chief representatives of board actions.
The level of agreement between these two groups was tested with questions regarding the following: the importance of corporate governance; its effectiveness; the level of satisfaction and influence of institutional investors; corporate social responsibility; and future challenges for firms.