TIP654: Investing Across the Life Cycle w/ Aswath Damodaran
We Study Billionaires - The Investor’s Podcast Network
Understanding Stakeholder Priorities in Corporate Governance
CEOs face the challenge of balancing the interests of diverse stakeholders, including shareholders, employees, customers, and suppliers. Different types of shareholders have varying preferences; institutional investors and pension funds may prefer dividends, while wealthier investors might lean towards stock buybacks for price appreciation. The governance approach must reflect these disparate interests, which are often influenced by the company's sector. For instance, traditional telecom companies, catering to lower-income and pension fund investors, should focus on dividends, while technology firms with wealthier investors may prioritize share buybacks. This clientele effect suggests investors should align their choices with their preferences regarding dividends or buybacks. Furthermore, unlike other stakeholders, shareholders lack contractual claims on a company's resources, thus positioning them at the end of the priority line. Their role in corporate governance is justified because they bear the residual risk; without proper attention to shareholder interests, the potential for maximizing value diminishes and ultimately affects all stakeholders.
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