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Roundtable Discussion of Corporate Governance Issues at Yale

On January 19, CED joined with the Aspen Institute Business and Society Program and the Millstein Center for Corporate Governance and Performance at the Yale School of Management to host a roundtable discussion of corporate governance issues.  The half-day session in New York focused on the role of institutional investors, and brought together academic researchers and business practitioners, including CED co-chair Don Peterson, corporate governance subcommittee chair Ben Heineman, and other Trustees to discuss this key but little-examined aspect of corporate governance and performance. 

CED and the other co-hosts share a concern for short-termism—the tendency of corporate decision makers to allow short-term considerations to trump durable long-term growth, sustainable profit objectives, and integrity of the corporation.  The meeting focused on whether institutional investors (pension funds, mutual funds and other asset holders) and their asset managers are part of that problem.  Does the structure of asset manager’s compensation promote a focus on short-term results rather than long-term value creation?  Does pension fund governance play a role?  How do fund trustees and investment managers interpret fiduciary duties?

As with many discussions of this type, the meeting ended with more questions than answers.  The discussion identified some potential policy initiatives to improve information disclosure by institutional investors.  It also drew greater attention to definitional questions: what is meant by short-termism?  What are fiduciary duties, and what role do legal safe harbors have on decision making?