Corporate governance, the internal policies and leadership that
guide the actions of corporations, played a major part in the
recent global financial crisis. While much blame has been targeted
at compensation arrangements that rewarded extreme risk-taking but
did not punish failure, the performance of large, supposedly
sophisticated institutional investors in this crisis has gone for
the most part unexamined. Shareholding organizations, such as
pension funds and mutual funds, hold considerable sway over the
financial industry from Wall Street to the City of London.
Corporate Governance Failures: The Role of Institutional
Investors in the Global Financial Crisis exposes the misdeeds
and lapses of these institutional investors leading up to the
recent economic meltdown.
In this collection of original essays, edited by pioneers in the
field of fiduciary capitalism, top legal and financial
practitioners and researchers discuss detrimental actions and
inaction of institutional investors. Corporate Governance
Failures reveals how these organizations exposed themselves
and their clientele to extremely complex financial instruments,
such as credit default swaps, through investments in hedge and
private equity funds as well as more traditional equity investments
in large financial institutions. The book's contributors critique
fund executives for tolerating the "pursuit of alpha" culture that
led managers to pursue risky financial strategies in hopes of
outperforming the market. The volume also points out how and why
institutional investors failed to effectively monitor such volatile
investments, ignoring relatively well-established corporate
governance principles and best practices.
Along with detailed investigations of institutional investor
missteps, Corporate Governance Failures offers nuanced and
realistic proposals to mitigate future financial pitfalls. This
volume provides fresh perspectives on ways institutional investors
can best act as gatekeepers and promote responsible investment.
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