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by John Pound, Harvard University SELECTIONS FROM THE NEW FOUNDATIONS WORKING GROUP CREATING RELATIONSHIPS BETWEEN CORPORATIONS AND INSTITUTIONAL INVESTORS: AN INTRODUCTION by John Pound, Harvard University ince 1990, a remarkable sequence of events has dramatically altered the relationship between investors and corporations in the U.S. corporate governance arena. The corporate control mechanisms that dominated the American equity market during the past decadeâtakeovers, leveraged buyouts, and other transaction-based vehicles for changing corporate control and corporate policyâhave all but disappeared. At the same time, the focus of attention has shifted to the effectiveness of corporate boards and, more pointedly, to the relationships among boards, shareholders, and managers. The disappearance of takeovers can to be traced to a number of factors, including the collapse of risk financing and a legal and political backlash against the takeover mechanism. By contrast, the new focus on corporate boards can be attributed largely to one cause: the increasing ownership concentration and activism of large institutional investors. To some observers, notably financial economists, this change has seemed like an entry into a second-best world. Takeovers and LBOs clearly created huge gains in value and, in some cases, transferred assets away from discredited management teams. Now those
Journal of Applied Corporate Finance – Wiley
Published: Jun 1, 1993
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