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

A new strand of the corporate governance literature on ownership seems to be in the process of developing what might be considered the next generation of the concept of active ownership: responsible ownership. This paper aims to contribute to this strand of literature by addressing an element of responsible ownership that is not yet well developed: the collective actions by owners. We introduce what we have named an ownership strategy as a new governance mechanism for collective action and responsible ownership. Using data from semi-structured interviews with owners, board members, and non-executive insiders together with documentary analysis, we find support for the theoretical construction. 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 the owners and the directors and between the directors and management is improved due to better alignment. Results show that an ownership strategy is an effective corporate governance mechanism to promote long-term commitment of owners while minimizing agency problems and promoting trust between principals and principals and their agents. The findings indicate that an ownership strategy establishes a much needed long-term focus and commitment of owners while creating a sense of security among the board of directors that they are working within the will of their owners.