Corporate governance - Vigil

The rating agency said the country’s banks have solid liquidity and capital positions

The financial economics literature on corporate governance, largely non-existent prior to the 1970s, has grown enormously during the past forty years. Most of this literature focuses on three dimensions of governance that are relatively easy to measure—ownership structure, the size and structure of boards, and executive compensation—and most of it examines governance from the perspective of agency theory.

Shareholder activism is an investment strategy that investors such as hedge funds (HFs) use to increase the value of their investment by intervening in the management of a targeted firm. Activists can nudge management to take shareholder-friendly actions such as increasing dividends or share buybacks, doing spinoffs, or being acquired.

The National Association of Corporate Directors (NACD), the authority on boardroom practices representing more than 20,000 board members, today released the 2019–2020 NACD Public Company Governance Survey, the only survey of its kind that provides an overview of the current state of the American boardroom. The report offers detailed insights into governance attributes and practices, including director priorities and trends, board size and structure, board composition, and key oversight practices.

The U.S. and China’s negotiations on a phase-one deal seem to have stalled again. The market was already aware of the limited nature of the likely deal, but was still hoping for it. Against this backdrop, the investors have reacted negatively to the increased likelihood of not reaching a deal on December 15. If this is the case, the U.S. will apply additional tariffs on Chinese imports. The obvious question to address, thus, is, what can happen to China under such a scenario?

In hindsight, 2019 may come to be viewed as a watershed year in the evolution of corporate governance.  After years of growing alarm about endemic short-termism, the sustainability and competitiveness of businesses over a long-term horizon, and the role of corporate policies in contributing to socioeconomic inequality, there has been an emerging consensus that the prevailing corporate governance system is broken.