COVID-19 brought the perils of 'short-termism' back to the fore : how will corporate governance respond?

Abstract

The COVID-19 pandemic has turned the academic eye onto corporate governance and its current shortcomings. Shareholders are at the centre of the company and its decision-making which is the consequence of the prevalent & well-established shareholder primacy model of corporate governance. This dissertation strives to establish whether the criticism of shareholder primacy, by virtue of its propensity to bring about ‘short-termism’, holds water. The research delves into the perception of shareholders at the apex of the corporation and how such mentality has led to companies pursuing short-term gains over long-term investments. COVID-19, has underlined the message derived from the ’07-’09 financial crisis, that this form of corporate decision making is hampering companies and undercutting their ability to be sustainable. This correlates the corporate purpose and how the company is conceptualized. The research will go one step further and discuss alternative models of corporate governance which have been purveyed by commentators from within the field. It is true a change in corporate governance that one can practice a corporate purpose which values wealth maximisation but in a sustainable manner. The contrast between shareholder and stakeholder primacy is key in illuminating the different models of corporate governance. Other alternatives are also discussed, all of which lend ideas from these two polarised sides of the corporate governance debate. There is no panacea to this issue and this dissertation does not attempt to present any hasty solutions. Companies are nuanced legal creatures and hence, corporate governance must be catered for each specific company. Nevertheless, this research demonstrates the indisputable need for change. It highlights the valuable characteristics which must be embraced in order to achieve the sustainable model of corporate governance required in the contemporary corporate environment.