No one pays much attention to the actual owners, really, of publicly-held companies. And when they do, it’s usually via a simplistic proxy of one sort or another. The classics are the little old lady who buys “blue chip” stocks for reliable dividend payments, and the frenzied trader looking for rapid growth.
There was a time when this characterization made more sense, when people bought individual stocks directly from the owned company, or through brokers. The little old ladies owned one or only a few companies, and the traders seemed to constantly be on the phone buying and selling. In such an environment, it was easier for managers to adopt their own corporate identities and strategies, and let investors vote policy with their dollars.
But, of course, a lot of things have changed, on both sides of the equation. A company’s strategic identity, these days, may be a good bit more difficult to pin down than it used to be. That can be a problem for owners trying to make an investment decision.
And the same goes for the type of person who owns shares in it. After all, it’s not just the little old lady and the guy screaming buy/sell orders into the phone anymore. It’s a much broader range of people, positioned much more incrementally along an amazingly extensive and complex spectrum of possible investment goals. And that can be a problem for managers trying to gauge strategic options.
Moreover, increasing numbers of people don’t even really own the companies they supposedly own. Rather, they own shares in mutual funds, or have rights in other investment vehicles such as retirement funds operated by governments, unions, or corporations. The degree of individual ownership becomes murky, here, depending on the legal structure of the investment vehicle, with varying sorts of tax obligations and voting privileges.
But the real puzzle is that these place yet additional intermediary layers between the manager and the owners. Directors and managers can be overwhelmed by the challenge of determining the intent and interests of so wide a range of investors, organized into such diverse ownership vehicles, with their correspondingly complex degrees of shareholder rights.
What do all of these people want? We’ll take a look at that question, tomorrow. See you then!
—
This post is a part of a series. You can learn about and link to the other articles here: Anonymous owners
—
Today’s tip: While there are strong arguments for developing the role of a director into a professional avocation separate from management, the fact that today directors are, mostly, managers has interesting implications for the CEO succession issue. Please see this enlightening WSJ piece on the topic.
Note that one successful CEO candidate attributes his selection to the fact that he “agreed to change course again if the board decided it was necessary.” Well, we’ll take such progress wherever it offers itself. It is promising to see any evidence of boards taking more assertive control of strategic direction from CEOs, even if both groups are ultimately drawn from the same ranks.
—
More and more readers are viewing the new mobile-friendly version of the Managing Leadership Blog on their internet-capable phones and pocket computers, and you can, too! Just use the “Get Mobile Version” link at the upper right of this page to have the address sent to your device or, for those of you reading this in your email client or RSS reader, go to http://fdm8.com/managingleadership to view the site (you can visit it right here from your computer to get an idea of what it will look like on your portable device).
If you enjoy this way of accessing this site, you can sign up for text alerts (of new posts) to your phone simply by enrolling your number in the mobile subscription link, also at upper right on the sidebar of the main page. Why not try it now!
And if you prefer to continue viewing the site on your regular computer, then please do subscribe by email or RSS reader, so you’ll always get the latest posts!
Similar Posts:
- Narcissistic Bosses
- Who is responsible?
- Knocking heads: Boards and Management
- Careful what you wish for
- Capitalism and boards
Technorati Tags: owner, publicly-held, blue chip, stock, dividend, trader, company, broker, manager, corporate, investor, policy, strategic, identity, investment, decision, mutual, fund, retirement, government, union, corporation, ownership, voting, shareholder, director, professional, avocation, management, CEO, succession, WSJ
Sphere: Related Content
ON DECK
2 Trackbacks/Pingbacks
[...] We briefly reviewed, yesterday, one generally well-known aspect of the anonymity of owners in today’s publicly-held companies - the difficulty of determining who, really, they are, or who are their proxies through whom they own these companies. But that only points to the really key frustration in this equation, the question: What do they want? [...]
[...] Over the past few days we’ve seen how difficult it can be to identify who really owns today’s publicly-held and traded companies, what they truly want from that ownership, and how they actually communicate that intent and interest. It must be said that, for those of us who argue that the owner’s rights must be given active primacy in the scales of power for corporate governance to function properly, the results of our review do not bode well for that actually happening. [...]
Post a Comment