John Matsusaka is the Charles F. Sexton Chair in American Enterprise in the Marshall School of Business, Gould School of Law, and Department of Political Science at the University of Southern California, and Executive Director of the Initiative and Referendum Institute at USC. He received his Ph.D. in economics from the University of Chicago, and has held visiting appointments at the Hoover Institution at Stanford University, UCLA, Caltech, and the University of Chicago. His research focuses on the financing, governance, and organization of corporations and governments. He has published numerous scholarly articles, served as a consultant for the White House Council of Economic Advisors, and is the author of For the Many or the Few: The Initiative, Public Policy, and American Democracy (University of Chicago Press, 2004). From 2007 to 2013 he served as Vice Dean for Faculty and Academic Affairs in the USC Marshall School of Business.
The problem with encouraging firms to maximize shareholder welfare is how to prevent managers and special interests from diverting corporate resources in the name of shareholder welfare to causes that provide them, their family, or their friends with private benefits.
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The merits of increasing shareholder power are less obvious than reforms that increase companies’ exposure to pressure from activist shareholders, since increasing shareholder power tends to increase the influence of special interests. Part 2 of a two-part series.
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Contemporary corporate governance reform has been a mixed bag: reforms that increase a company’s exposure to competition through the control market have been helpful, while reforms that empower special interest shareholders are a cause for concern. First part of a two-part series.
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