The Firm Divided: Manager-Shareholder Conflict and the Fight for Control of the Modern Corporation

ISBN : 9780190641184

Graeme Guthrie
352 ページ
156 x 235 mm

A battle is being fought within corporations. Shareholders want managers to make their shares as valuable as possible, managers want shareholders to leave them alone, and the board of directors is caught in the middle. The Firm Divided shows how strong boards persuade managers to do what's best for shareholders-and why weak boards don't. Graeme Guthrie blends the stories of particular firms and individuals with the insights of scholarly research, enhancing understanding of how seemingly separate events are consequences of the separation of ownership and control, the ultimate cause of manager-shareholder conflict. Boards of directors can affect the outcome of this conflict by monitoring managers, providing incentives for managers to work in shareholders' best interests, delegating monitoring to outside parties, and influencing the effectiveness of the market for corporate control. How directors do this depends on how they weigh their fiduciary duty to shareholders against the close ties that bind them to senior executives. The Firm Divided provides conceptual insight, underpinned by research into corporate governance, into board-manager interactions. It shows how tools that can benefit shareholders when used by strong boards can actually harm shareholders when used by weak boards. Guthrie provides a 360 degree view of firms, exploring the ways in which each player pursues their own goals, with examples from a range of firms in diverse industries.


Preface v

I Monitor 1
1 A gadfly in the ointment
The consequences of separating ownership and control 3
2 Whose side are you on?
The role of the board of directors 23
3 Overseeing the unseeable
The conflict between managers and shareholders 47

II Motivate 69
4 Narrowing the gap
The incentives generated by managerial ownership 71
5 A primer on pay
Executive compensation and efficient contracting 97
6 Hiding high pay
Executive compensation and managerial power 135
7 Separating the wheat from the chaff
Incentives generated by executives' career concerns 169

III Delegate 205
8 With one hand tied behind their back
Delegating monitoring to external capital markets 207
9 No skin in the game
Delegating monitoring to financial analysts 239
10 Crashing the party
Delegating monitoring to large shareholders 275

IVSell 309
11 A new broom
The market for corporate control 311
12 Bypassing the board
Offensive tactics in hostile takeovers 341
13 Fighting back
Defensive tactics in hostile takeovers 377

V The rules of the game matter as well 413
14 Caught in the middle
Reforming the legal and regulatory environment 415

Epilogue 431
Acknowledgments 433
Notes 435
Bibliography 509


Graeme Guthrie is a professor in the School of Economics and Finance at Victoria University of Wellington, New Zealand. His research has appeared in the top journals on finance and economics, and as a consultant he has provided advice on a wide variety of issues in relation to agriculture, electricity, gas, real estate, and telecommunications, much of it using real options analysis. He is the author of Real Options in Theory and Practice (Oxford University Press).