Ownership Strategy: A Governance Mechanism for Collective Action and Responsible Ownership

A new strand of corporate governance literature on ownership is developing the next generation of the concept of active ownership: responsible ownership. This paper aims to contribute to this strand of literature by addressing an inchoate element of responsible ownership: collective action by owners. We introduce an ownership strategy as a governance mechanism for collective action and responsible ownership and ask how an ownership strategy improves corporate governance. Using data from semistructured interviews with owner representatives, board members, and non-executive insiders, together with observation and documentary analysis, we find support for the theoretical construction and an answer to the research question. Specifically, we find that the ownership strategy functions as a collaboration pact, which cultivates long-termism, and that the outcome is improved agency, i.e. that both the relationship between owners and directors and between directors and management is improved due to better alignment. The findings indicate that an ownership strategy establishes a much-needed long-term focus and commitment of owners while creating a sense of security and understanding among the members of the board of directors, i.e. that they are working with the will of their owners. As such, it suggests new avenues of research for corporate governance literature.