Pichhadze, Aviv --- "Institutional Investors as Blockholders" [2012] ELECD 389; in Vasudev, M. P.; Watson, Susan (eds), "Corporate Governance after the Financial Crisis" (Edward Elgar Publishing, 2012)

Book Title: Corporate Governance after the Financial Crisis

Editor(s): Vasudev, M. P.; Watson, Susan

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9780857931528

Section: Chapter 7

Section Title: Institutional Investors as Blockholders

Author(s): Pichhadze, Aviv

Number of pages: 16

Extract:

7. Institutional investors as
blockholders
Aviv Pichhadze

1 INTRODUCTION

In describing the rise to prominence of the shareholder-oriented model
of the corporate form, Hansmann and Kraakman (2004) noted, inter
alia, that this process involved the diffusion of public firm ownership and
the rise to prominence of the institutional investors (IIs). In the context
of IIs, Hansmann and Kraakman (2004) noted that the interests of this
shareholder group coincide `with those of public shareholders and . . . [IIs]
are prepared to articulate and defend those interests' (p. 49). In addition,
they noted that `[t]hese institutions not only give effective voice to share-
holder interests, but promote in particular the interests of dispersed public
shareholders rather than those of controlling shareholders or corporate
insiders' (ibid.). Finally, in this context, they note that `the new activist
shareholder-oriented institutions [i.e., IIs] are today acting increasingly on
an international scale . . . We now have not only a common ideology sup-
porting shareholder-oriented corporate law, but also an organized interest
group . . . that is broad, diverse, and increasingly international . . .' (ibid.).
Accordingly, IIs seem to (i) have interests that coincide with the inter-
ests of the shareholder body in general in the public firm, (ii) promote
dispersed ownership, and (iii) crusade for shareholder interests inter-
nationally. Hence, they play an important role in corporate governance
both domestically in the US and internationally. In this chapter, I examine
these three propositions. I do this against the background of Pichhadze's
Market Oriented Blockholder Model (MOBM) that shows ...