The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Thu, 11 Jun 2026 12:59:28 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png The False Hope of Stewardship in the Context of Controlling Shareholders: Making Sense Out of the Global Transplant of a Legal Misfit – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 The False Hope of Stewardship in the Context of Controlling Shareholders: Making Sense Out of the Global Transplant of a Legal Misfit https://corpgov.law.harvard.edu/2021/07/02/the-false-hope-of-stewardship-in-the-context-of-controlling-shareholders-making-sense-out-of-the-global-transplant-of-a-legal-misfit/?utm_source=rss&utm_medium=rss&utm_campaign=the-false-hope-of-stewardship-in-the-context-of-controlling-shareholders-making-sense-out-of-the-global-transplant-of-a-legal-misfit https://corpgov.law.harvard.edu/2021/07/02/the-false-hope-of-stewardship-in-the-context-of-controlling-shareholders-making-sense-out-of-the-global-transplant-of-a-legal-misfit/#comments Fri, 02 Jul 2021 12:59:51 +0000 https://corpgov.law.harvard.edu/?p=138717?d=20210702085951EDT Posted by Dan W. Puchniak (National University of Singapore), on Friday, July 2, 2021
Editor's Note:

Dan W. Puchniak is associate professor of law at the National University of Singapore. This post is based on his recent paper, forthcoming in the American Journal of Comparative Law. Related research from the Program on Corporate Governance includes The Agency Problems of Institutional Investors by Lucian Bebchuk, Alma Cohen, and Scott Hirst (discussed on the Forum here); Index Funds and the Future of Corporate Governance: Theory, Evidence, and Policy by Lucian Bebchuk and Scott Hirst (discussed on the forum here); and The Specter of the Giant Three by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).

The 2008 Global Financial Crisis (GFC) rocked the foundation of the United Kingdom’s financial system. As the dust settled, the UK tried to figure out what went wrong. An autopsy of UK corporate governance revealed that it had developed an acute problem. Institutional investors had come to collectively own a substantial majority of the shares of listed companies, but often lacked the incentive to use their collective ownership rights to monitor them. The failure of these rationally passive institutional investors to act as engaged shareholders—or, as is now the popular vernacular, to be “good stewards”—allowed corporate management to engage in excessive risk taking and short-termism, which were primary contributors to the GFC.

In 2010, the UK enacted the world’s first stewardship code (UK Code) to solve this problem. The goal of the UK Code was to incentivize passive institutional investors to become actively engaged shareholder stewards. After a decade, there are still divergent views on whether the UK Code will ever be able to achieve this goal.

(more…)

]]> https://corpgov.law.harvard.edu/2021/07/02/the-false-hope-of-stewardship-in-the-context-of-controlling-shareholders-making-sense-out-of-the-global-transplant-of-a-legal-misfit/feed/ 1