Steen Thomsen © 2012




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.Research on corporate governance


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Foundations which own business companies.


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Colums and blogs in Danish.











Ownership lays the foundations of corporate governance. The owners elect the board. The board hires managers and sets their incentives. Boards and managers can never do better than the owners who choose them. Therefore getting corporate governance right must start by getting ownership right.




The classic problem of corporate governance is the separation of ownership and management which gives rise to what economists call agency problems: managers managing other people's money. Agency relationships involve a host of incentive and information problems which can significantly reduce the value which companies create for their shareholders and for society as a whole,


The simplest solution to this problems is to eleminate it by making managers own parts of the businesses which they operate. Another efficient solution is to have large owners monitor and possibly replace managers. Large owners have both the power and the incentives to move businesses forward. However, both managerial and blockholder ownership calls for regulation to protect the interests of minority investors.


There are several ways to organize the ownership of lage companies. They may be owned by founders, founding families, pension funds or ther portfolio investors, banks, private equity funds, hedge funds, other companies, governments, cooperatives, employess or even non profit foundations. Each have their costs and benefits depending for example on the company's need tor external finance, its complexity and company law. 


Arguably, the most important part of corporate governance is to identify the best owner, who has the competencies to make the best use of its resoruces and thereby to maximize its value.







In a new book with Martin Conyon, Corporate governance: Mechanisms and Systems, I try to provide a grand view of the field.




Mechanisms such as ownership, boards, incentives and regulate work to provide companies with control and direction. Countries combine them to form systems.