| Summary: | Thesis (S.M.)--Massachusetts Institute of Technology, Sloan School of Management, 2006. === Includes bibliographical references (leaves 95-98). === At the end of the 1980s, there was some speculation that leveraged buyouts (LBOs) would lead to the demise of the public company in favor of privately owned companies after a decade of the market for corporate control serving as a check against agency costs and management inefficiency. Of course, this didn't happen, and throughout the 1990s, in addition to the market for corporate control, the use of stock-based managerial incentives served a similar purpose. But the failure of these measures to prevent the next cycle of corporate governance crises that occurred in the last five years (e.g., WorldCom, Enron) ushered in an era of hard governance whereby market mechanisms and incentives have given way to Sarbanes-Oxley legislation and stock exchange rules designed to ensure proper stewardship of companies by their boards of directors. A central theme of this thesis is that, although this new era of hard governance might have decreased the degree of information asymmetry between investors and their agents, and thus improved the state of corporate governance, it may be that this has simply lulled us into a false sense of security until the next cycle of corporate governance crises. Companies might adopt symbolic mechanisms that are decoupled from actual practice to evidence compliance with increasing rules and regulations. === (cont.) Some research suggests that a different course-soft governance-is necessary to foster a constructive relationship between companies and their investors, through investor intermediaries such as hedge funds. Soft governance refers to the exercise of voice by investor intermediaries instead of exit (i.e., trading out of a company's stock). It is believed that not only is soft governance necessary to supplement hard governance, but that the lack of it might also be a significant lost opportunity that could contribute to an erosion of U.S. business competitiveness. This thesis is devoted to an assessment of a specific mechanism for instituting soft governance, referred to as Ownership Shares, a concept introduced by the founder of Institutional Shareholder Services (ISS), Robert A. G. Monks, in 2004. === by Todd M. Gershkowitz. === S.M.
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