Why Corporate Governance Today?

V. Conclusion

Before stock ownership became widely dispersed through the public markets, those who owned a business cared about it. The owners may have hired others to perform day-to-day management, but they still monitored their managers and took corrective action as needed. Why? Because they wanted their business to do well, and increase in value. Fundamentally, the corporate governance movement is simply an attempt to revive the rights and duties of ownership.

It appears that the era of dispersed ownership and shareholder passivity is coming to a close. According to Harvard Law School lecturer John Pound, a new model of "governed corporation" is emerging in America, built upon the foundation laid by shareholder activism.^[43]

Under this model, a corporation is governed rather than managed, by its three critical constituencies -- managers, directors and shareholders. The result is improved decision making by a corporation that is "healthier, more self-renewing, and more flexible."^[44]

The past decade has brought about constructive change in the direction and effectiveness of CalPERS' corporate governance program. The System can only hope that future years will bring about an even greater acceptance of this philosophy by the business community, as directors and managers realize that corporate governance is a valid means to a mutually-desired outcome of improved performance.

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43 - John Pound, The Promise of the Governed Corporation, Harvard Business Review (Mar-Apr 1995) at 89.

44 - Id. at 94, 98.

CalPERS, 8-1-95.
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CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
WHY CORPORATE GOVERNANCE TODAY?
A Policy Statement
August 14, 1995
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