Recent research conducted by McKinsey in conjunction with Institutional Investor found that many large private money managers especially those looking for long-term value are willing to pay a higher stock price for companies with good, independent board governance. Companies that are performing well have the option of doing nothing for now but only until there is a period of poor results, a complex acquisition, or a crisis. CEOs could search for ways to thwart investors, as they did in the 1980s. But underlying forces make this strategy unpromising. Institutional ownership will probably continue to increase.
Public opinion is suspicious of CEOs, whose pay has soared even while companies downsized.
Politicians aren t likely to attack investors like these on behalf of CEOs. Finally, the SEC has been embracing a pro-shareholder stance that seems unlikely to change. CEOs can benefit personally from strong, independent boards. As major stockholders themselves, they should pursue strategies that increase the stock price. Harmonious relations with investors free CEOs to focus their time and energy on substantive business issues.