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Investor EngagementInvestors and Management Practice under Shareholder Value$
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Roderick Martin, Peter D. Casson, and Tahir M. Nisar

Print publication date: 2007

Print ISBN-13: 9780199202607

Published to Oxford Scholarship Online: September 2007

DOI: 10.1093/acprof:oso/9780199202607.001.0001

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Shareholder Value, Investor Engagement, and Management Practice: a Normative Evaluation

Shareholder Value, Investor Engagement, and Management Practice: a Normative Evaluation

Chapter:
(p.169) 8 Shareholder Value, Investor Engagement, and Management Practice: a Normative Evaluation
Source:
Investor Engagement
Author(s):

Roderick Martin

Peter D. Casson (Contributor Webpage)

Tahir M. Nisar (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199202607.003.0008

This chapter adopts a normative standpoint in examining both shareholder value and investor engagement. Shareholder value analyses exaggerate the weakness of internal control systems, overestimate the efficiency of the capital market as a means of transferring resources from sectors of low value added to sectors of high value added, and attributes too much importance to the capital market and equity finance as a source of new investment. Shareholder value analyses neglect the risks incurred by other stakeholders in the corporation, including employees. Investor engagement to enhance shareholder value or to secure compliance with ‘best City practice’ is regarded as uncontroversial. However, engagement to achieve wider social values may distort corporate practice. The chapter concludes by arguing for greater openness in corporate governance and the representation of a wider range of interests, not for further entrenchment of shareholder interests.

Keywords:   agent opportunism, the firm, corporate social responsibility, corporate transparency, internal controls, capital market, equity finance, protecting shareholder interests, resource allocation, plurality of interests

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