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A Social Movement Perspective on Corporate Control
Abstract
This paper argues that efficiency-oriented approaches to corporate governance and law are limited in their ability to explain the politics of corporate control and, in particular, the rise of shareholder activism. Politics, like other social action, is embedded in social structures that influence whether, when, and how collective action is accomplished by interest groups. We use a social movement framework to explain the changing capacities of shareholders and managers-as members of classes-to act on their interests in control at the firm, state, and federal level. We illustrate this framework by showing how activist shareholders increased their influence in corporate governance in the early 1990s.
... On the one hand, they are not supposed to seek an active involvement in the companies' strategies. However, some works argue that institutional investors, including banks and mutual funds, do exert control to some extent [14,15,16,17]. In particular, the outcome of votes can be influenced by means of informal discussions, in which pro-management votes are used as a bargaining chip (e.g., in exchange of business related "favors" or in negotiating the extension of credit) § . ...
The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic "super-entity" that raises new important issues both for researchers and policy makers.
... The pillar (with nodes in red color) combines the ownership structure, the investors and the main corporate governance matters put under the perspective of firm innovation. It is built upon the contributions dealing with the Agency Theory in terms of the separation of ownership and control (Fama and Jensen, 1983), which is also at the core of references, the causes and consequences of that ownership structure (Demsetz and Lehn, 1985), dealing with corporate governance control matters such as takeovers (Pound, 1992), antitakeover amendments to bylaws (Brickley et al., 1988) or shareholder activism (Davis and Thompson, 1994), the diversification strategy and R&D intensity (Baysinger and Hoskisson, 1989), institutional investors (Hansen and Hill, 1991;Useem, 1996) and their relation with board composition (Gilson and Kraakman, 1991) and firm innovation (Kochhar and David, 1996), failure at corporate governance (Daily and Dalton, 1994), A second pillar links Agency Theory to the institutional context for the firm innovation. Thus, it provides theoretical foundation around the Agency Theory (Eisenhardt, 1989), the agency costs, and the ownership structure (Jensen and Meckling, 1976), considering institutional investors (Chaganti and Damanpour, 1991) which play in a financial system which need a proper strategic management alignment (Allen, 1993). ...
... We discuss a variety of external triggers for corporations: from publicity to social movements to regulations. Similarly, social movement literature discusses how corporate protests and large-scale media coverage affecting corporate stock prices can be particularly effective at inciting change (King and Soule 2007;Davis and Thompson 1994). There are parallels to draw from domains like privacy and ESG (environmental, social impact, and corporate governance) issues to RAI's place within capitalism. ...
Responsible artificial intelligence (RAI) is increasingly recognized as a critical concern. However, the level of corporate RAI prioritization has not kept pace. In this work, we conduct 16 semi-structured interviews with practitioners to investigate what has historically motivated companies to increase the prioritization of RAI. What emerges is a complex story of conflicting and varied factors, but we bring structure to the narrative by highlighting the different strategies available to employ, and point to the actors with access to each. While there are no guaranteed steps for increasing RAI prioritization, we paint the current landscape of motivators so that practitioners can learn from each other, and put forth our own selection of promising directions forward.
... Year Key findings Data/Methods used Limitations Suggested future research Davis & Thompson 1994 Efficiency-oriented approaches to corporate governance and law are limited in their ability to explain the rise of shareholder activism as politics is embedded in social structures that influence whether, when, and how collective action is accomplished by interest groups. A social movement framework helps explain the changing capacities of shareholders and managers to act on their interests. ...
Research Question/Issue
The objective of this special issue (SI) is to galvanize research that examines the impact of different kinds of global social movements (GSMs) on the practice of international corporate governance.
Research Findings/Insights
The articles included in this SI provide unique insights into how various GSMs, including the feminist, #blacklivesmatter, and climate movements, influence and are influenced by corporate governance actors and practices across different institutional contexts.
Theoretical/Academic Implications
Executives and boards face increasing pressures to make corporate decisions that consider the demands emerging from different GSMs. This SI uncovers how and why some social movements weigh heavier in corporate decision‐making. This SI uncovers the implications of GSMs for corporate governance actors and processes in different institutional contexts.
Practitioner/Policy Implications
Equipped with the power of the internet, recent social movements have become more global in character. The rising power, reach, and prominence of large corporations have made them a common target of GSMs that aim to influence not only societal values but also corporate values. The articles in this SI provide useful insights into how GSMs engage with corporations and corporate actors and assess their impact on the governance of the firm in different countries.
... This represents a combination of exit (petitioning a superior, seperate power) and loyalty. 12 An illustration of voice is ecological economists critiquing the notion of ecosystem services; calls for change from within (Farley et al. 2024) 6 needed to make a decision to exit; most actors don't jump-ship if there's not a viable alternative (Davis and Thompson, 1994). Exit allows for building new institutions or strengthening competitors; it allows one to become fully-devoted to institutional change 13 . ...
In a time of ecological and social crises, designing new institutions is crucial for meeting future challenges. Institutions emerge from the imaginations of individuals, moving into social movements and crystallizing in legal structures. As present movements seek to develop tomorrow’s governances, they turn to decentralized structures: distributed networks with little hierarchy, characterized by a diversity of actors and dynamics. While movements and technologies may seek to utilize decentralized ideas, they lack design principles: only recently has it been possible to decentralize at the national stage. Designs may come from biology and ecological networks; fungi, plants, and slime molds in soil to the neurons, glia, and blood vessels within our own bodies. This article blends these biological analogies with present technologies like blockchain and Web3 to posit future decentralized institutions, movements and legalities that give greater consideration to the more-than-human world.
This study explores groupthink on the boards of family firms. We conjecture that institutional investors, in the face of principal–principal agency issues, are discouraged by groupthink and consequently invest less in family firms. Appropriate corporate governance in the form of greater board diversity, lower director tenure, busier boards, more financial disclosure, and bigger shareholder voice should help in alleviating these institutional investor concerns. We examine a sample of firms from the S&P 500 and find evidence consistent with these propositions. Also, we provide evidence that board generational heterogeneity in family firms exacerbates groupthink.
Research Questions/Issue
In this bibliometric review of shareholder activism literature spanning 1983–2021, we pursue two objectives. Firstly, we investigate the degree of interdisciplinarity in the field, and second, we scrutinize publication trends, foundational knowledge, core topics, and emerging thematic trends, exploring the trajectory of shareholder activism research over time and providing a roadmap for future scholars.
Research Findings/Insights
Systematic analysis of 1055 scholarly works reveals significant growth and a trend toward interdisciplinarity, though disciplinary silos persist. Shareholder activism is evolving beyond traditional, firm‐level financial motivations to include sustainability‐oriented goals, blending environmental, and social objectives with corporate governance concerns and financial interests. This shift signals broader engagement by diverse activist actors, strategies, and motivations, with a heightened emphasis on the long‐term impact of shareholder activism. To capture this complexity, we advocate for research that emphasizes the intricate interrelationships among actors, objectives, strategies and outcomes, encouraging a redefinition of theoretical and methodological approaches.
Theoretical/Academic Implications
Our analysis underscores the need for greater interdisciplinary engagement in shareholder activism research and highlights an expanding scope of topics, regions and theories. With growing scholarly interest in sustainability‐oriented shareholder activism, jurisdictional nuances, and the emergence of new activist actors like index funds and individual investors, we anticipate continued theoretical and methodological diversity.
Practitioner/Policy Implications
Policymakers and practitioners should adopt a holistic approach to shareholder activism, considering the multifaceted actors, objectives, and strategies involved. Evaluations of activist outcomes should account for both financial and non‐financial impacts at the firm‐, market‐, and macro‐levels.
Institutional investors of different types have been shown to exert differential influences on firm strategic decisions individually. Yet, research has largely overlooked how institutional investors of different types can collectively affect firm decision-making. This study investigates the legal type diversity of institutional ownership (hereafter “investor type diversity”) and its influence on corporate acquisitions. Because institutional investors with different legal types have distinct interests and objectives, investor type diversity can create principal–principal conflicts and prevent institutional investors from undertaking coordinated actions, weakening their collective power and ability to play a governance role. We posit that investor type diversity will be positively associated with CEOs’ opportunistic acquisitions because the dilution of shareholder governance, resulting from investor type diversity, grants CEOs the leeway to champion acquisitions aligned more with their personal gains. We also argue that the positive influence of investor type diversity on opportunistic acquisitions will be stronger when CEOs possess a higher level of general managerial ability. However, acquisitions pursued in the presence of higher investor type diversity will be associated with poorer performance. Findings from a sample of 2,106 U.S. firms lend support to our arguments. This study advances strategy research by highlighting the importance of investor type diversity in shaping shareholder governance effectiveness.
Many leading multinational enterprises (MNEs) are found to practice fewer corporate social responsible actions in developing countries even though they are legally mandated by their global supply chain partners (Abdul-Gafaru,2009; Murdoch & Gould, 2004; Philipp, 2009; Rondinelli, 2006; Stiglitz, 2006). Will the voluntary corporate social responsibility (CSR) initiatives of foreign multinational enterprises in China be a better alternative than legal regulations in a country where there is a weak legal enforcement system?
This paper analyzes the survival of organizations in which decision agents do not bear a major share of the wealth effects of their decisions. This is what the literature on large corporations calls separation of 'ownership' and 'control.' Such separation of decision and risk bearing functions is also common to organizations like large professional partnerships, financial mutuals and nonprofits. We contend that separation of decision and risk bearing functions survives in these organizations in part because of the benefits of specialization of management and risk bearing but also because of an effective common approach to controlling the implied agency problems. In particular, the contract structures of all these organizations separate the ratification and monitoring of decisions from the initiation and implementation of the decisions.
Preface Introduction Investing Decisions: Changes in Organizational Structure Investing Decisions: Changes in Ownership Structure Financing Decisions and Capital Structure Financial Policy Operating Decisions: Earnings and Forecasts The Market for Corporate Control Defense Tactics in the Market for Corporate Control Management Compensation and the Managerial Labor Market Management Response to Investor Decisions Bibliography Index
