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Corporate
Governance Revolution Investor
Capitalism
A new phenomenon is developing throughout the industrialized world. Since the collapse of South East Asian economies, roughly one year ago in the summer of 1998, the World Bank and the OECD have led efforts to create a consciousness of the need for good corporate governance throughout the world. What is developing is a set of standards of minimum characteristics that corporations must embrace if they are going to be successful competitively in attracting capital from the pension fund world. The major industrial companies have different structures of accountability. Indeed, in each of them theory and practice are quite different. Ultimately, what is important from the perspective of attracting investments is the reality of corporate management being effectively accountable to somebody outside of their own control. Increasingly, the activist responsibility is being assumed by the large pension funds who collectively comprise the emergence of the Global ShareownerŽ. These funds are dominant in the United Kingdom and the United States, and are very large holders in the public securities in all other countries. We have organized the Lens Fund in the United States, which invests institutional money in an activist mode. Together with Hermes in the United Kingdom, we also have a fund investing in securities listed on the London stock market. Our investment performance in the case of both of these funds has been very superior demonstrating that activism pays. What is meant by this is that the market places a higher value on companies where there is evidence of informed and effective involvement by owners than for companies without. It is thought that this tendency will expand rapidly throughout the world.
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