The Political Economy of Corporate Governance

Abstract:

Economists and others have argued that when business managers are rewarded to maximize profits and stock prices, the outcome will be efficient. However, in the name of creating “shareholder value,” corporate managers have incentives to engage in conduct that harms and endangers the corporation and its stakeholders inefficiently, as well as to lobby and influence governments so as to get away with such conduct. Thus, corporate governance as practiced today works poorly for most shareholders and for society as a whole, and governments often tolerate or exacerbate corporate governance distortions even in well-developed democracies. The persistence of these problems contribute to unfocused public discontent. I will draw extreme examples of the lack of political will to design and enforce proper rules for corporations from the financial sector. The problems are particularly challenging when the policy issues are not well understood by the public.

 

Speaker Bio:

Anat Admati is the George G.C. Parker Professor of Finance and Economics at the Graduate School of Business, Stanford University. She has written extensively on information dissemination in financial markets, trading mechanisms, portfolio management, financial contracting, and, most recently, on corporate governance and banking.

Since 2010, she has been active in the policy debate on financial regulation, writing many research and policy papers as well as media commentary. She is a coauthor of the book, The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It. In 2014, Admati was named by Time Magazine as one of the 100 most influential people in the world and by Foreign Policy Magazine as one of the 100 global thinkers.

Professor Admati received her BS from the Hebrew University in Jerusalem and her MA, MPhil and PhD from Yale University and an honorary doctorate from the University of Zurich. She is a fellow of the Econometric Society, and has served as a board member of the American Finance Association and has served on multiple editorial boards. She currently serves on the FDIC Systemic Resolution Advisory Committee and the CFTC Market Risk Advisory Committee.