ESG Flashcards
Dispersed vs. Concentrated Ownership
Dispersed ownership reflects the existence of many shareholders, none of which has the ability to individually exercise control over the corporation. In contrast, concentrated ownership reflects an individual shareholder or a group (called controlling shareholders) with the ability to exercise control over the corporation
Horizontal vs. Vertical Ownership
Horizontal ownership involves companies with mutual business interests (e.g., key customers or suppliers) that have cross-holding share arrangements with each other. This structure can help facilitate strategic alliances and foster long-term relationships among such companies. Vertical ownership (or pyramid ownership) involves a company or group that has a controlling interest in two or more holding companies, which in turn have controlling interests in various operating companies.
principal–agent problem
managers will seek to use a company’s resources to pursue their own interests
concentrated ownership and concentrated voting power
strong shareholders; weak managers
dispersed ownership and dispersed voting power
weak shareholders; strong managers
concentrated ownership and dispersed voting power
Possible due to voting caps
interlocking directorates
Corporate structure in which individuals serve on the board of directors of multiple corporations
mixed-ownership model
SOEs partially owned by sovereign governments but also have shares traded on public stock markets
insiders
Corporate managers and board directors who are also shareholders of a company.
independent board directors
Directors with no material relationship with the company with regard to employment, ownership, or remuneration.
One tier board vs two tier board
A one-tier board structure consists of a single board of directors, composed of executive (internal) and non-executive (external) directors. A two-tier board structure consists of a supervisory board that oversees a management board.
Shareholder activism
Strategies used by shareholders to attempt to compel a company to act in a desired manner.
straight voting structure
A shareholder voting process in which shareholders receive one vote for each share owned.
Dual-class share structure
company founders and/or management typically have shares with more voting power than the class of shares available to the general public
ESG Integration
An ESG investment approach that focuses on systematic consideration of material ESG factors in asset allocation, security selection, and portfolio construction decisions for the purpose of achieving the product’s stated investment objectives. Used interchangeably with ESG investing.
