• Keith Dalrymple

Shareholder, stakeholder, Manager Mandate: the Ft and corporate governance

John Plender’s recent article on corporate governance in the FT is notable for its conceptual focus. Most recent governance focused writing has focused on details such as disclosure in the Ghosn/Nissan affair and board responsibility with Carillion. While these are important issues, the more fundamental questions are what is the central role of the corporation and who should it serve?

The article quotes a former GE boss who noted in the 1930s that shareholders should earn a risk premium, with the remaining profits retained by the company, paid out as higher wages, or passed on to customers. This concept of stakeholder value is almost an anathema today. Modern capitalism appears to have arrived at the opposite state, with corporate investment and wages are pressured to enhance shareholder returns and drive astronomical management compensation packages.

Mr. Plender’s article does not proscribe specific fixes for our corporate ills. The value is in providing a longer-term context while highlighting current problems to frame a discussion. Efficient capital formation and long-term returns require effective corporate governance - and good governance is far more nuanced than growing EPS. It also entails good stewardship, which requires understanding all stakeholders and involves the equitable allocation of costs and benefits.

The full article is here:

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