Passive Investoren: Indexbasierte Vermögensverwaltung und die Corporate Governance der Publikumsgesellschaft
Abstract
The rise of index funds presents a challenge for the corporate governance of listed companies. Based on a comprehensive data analysis, the thesis documents the growing importance of passive asset managers in listed firms' ownership structures. It then explains why the incentives of these managers to engage in the corporate governance of their portfolio companies are not socially optimal, relying, among other things, on recent results from the empirical corporate finance literature. Finally, the thesis critically reviews the instruments employed by the legal system to respond to the problems identified, with a focus on the "stewardship" provisions of the revised Shareholder Rights Directive and the shortcomings of their specific design.
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I find overlapping institutional ownership (OIO) in a customer and supplier increases the duration of their supply chain relationship. Results are stronger when vertical holdup is more severe. A quasi-natural experiment around mergers of financial institutions provides causal evidence of OIO improving relationship survival rates. Concurrent with longer-lived relationships, valuations and innovation increase, consistent with OIO effects on relationship longevity being beneficial. I find evidence of OIO strengthening relationships via an internalization channel: With more OIO, partners cooperate more, with the supplier extending more trade credit. Overall, results indicate OIO strengthens vertical relationships by alleviating holdup problems.
The passive index investing revolution and the demand for bespoke environmental, social, and governance (“ESG”) investment products are the most monumental changes to shape the investor landscape for many years. These developments have been accompanied by an unprecedented concentration of power among BlackRock, Vanguard, and State Street (the “Big Three” asset managers). Inevitably, the Big Three are among the most powerful shareholders of the companies that have been identified as major contributors to the climate crisis. Due to the failure of governments to take effective action in the global effort to combat climate change, there has been intense pressure directed at the Big Three to provide investor driven solutions. The Big Three have increasingly purported to assume what I call the role of “sustainable capitalists”.
In this Article, I build upon Gilson and Gordon’s “agency capitalism” framework to put forward a new agency costs theory of sustainable capitalism. In this “sustainable capitalism” framework, I show that the Big Three still exhibit some form of “rational reticence”, especially with respect to firm-specific sustainability activism. There is also a risk that the Big Three may engage in “rational hypocrisy”, similar to corporate greenwashing. The combination of “rational reticence” and “rational hypocrisy” could result in a dual-monitoring shortfall – the “agency costs of sustainable capitalism”.
In the agency capitalism framework, the best solution that emerged was for specialist activist hedge funds to fill the monitoring shortfall by initiating firm-specific activism as “governance arbitrageurs”. In this context, activist hedge funds adapted their strategies to gain crucial support from longer-term institutional investors. Analogously, in the sustainable capitalism framework, ESG hedge funds have the potential to initiate firm-specific ESG activism as “ESG arbitrageurs” in a manner that appeals to, and mobilizes, the sustainable capitalism of the Big Three. Most prominently, ESG hedge funds can play a unique role in nominating specialist climate directors to corporate boards, with the Big Three lending their support to credible nominees. Activist hedge funds already have significant expertise in board representation campaigns and the Big Three have shown willingness to support board changes.
Other “responsible activists”, focusing more on portfolio-wide ESG issues, are also candidates for the role of “ESG arbitrageurs”. However, implementing meaningful strategic changes or board reform using the shareholder proposal mechanism has proven to be much more challenging. Therefore, a valuable role that other responsible activists can play in the ESG investor ecosystem is to focus on the problem of rational hypocrisy and target their activism at the Big Three themselves.
This book brings together classic writings on the economic nature and organization of firms, including works by Ronald Coase, Oliver Williamson, and Michael Jensen and William Meckling, as well as more recent contributions by Paul Milgrom, Bengt Holmstrom, John Roberts, Oliver Hart, Luigi Zingales, and others. Part I explores the general theme of the firm's nature and place in the market economy; Part II addresses the question of which transactions are integrated under a firm's roof and what limits the growth of firms; Part III examines employer-employee relations and the motivation of labor; and Part IV studies the firm's organization from the standpoint of financing and the relationship between owners and managers. The volume also includes a consolidated bibliography of sources cited by these authors and an introductory essay by the editors that surveys the new institutional economics of the firm and issues raised in the anthology.
Based on the new disclosure requirements for institutional investors, asset managers and proxy advisors introduced in the course of the implementation of Directive (EU) 2017/828, the study deals with the participation-related conflicts of interest of collective asset managers and proxy advisors, their treatment under European and national law to date, and the regulatory system of the Shareholder Rights Directive. On this basis, the question is examined to what extent the area under research requires further regulation. The focus is on the systemisation of the previous as well as the new conflict-related regulatory concept and, following on from this, the channelling of future legislative revisions.
U.S. academic discourse on director interlocks is not new. Yet, the increased attention to common ownership has also brought to light the increased tendency of interlocked directors to serve in the same industry. I termed these directors as horizontal directors in my earlier work—shining a light on the benefits they bring to investors and companies but also the risks they pose to governance and antitrust law. This article revisits the prevalence of horizontal directors armed with six additional years of data and shows that the prevalence of horizontal directors has remained steady, even as attention to common ownership has increased in recent years. These findings should serve as a clarion call to regulators—urging them to directly address horizontal directors.