Institutional investors, corporate elites and the building of a market for corporate control

Abstract

This contribution discusses the impact of the new role played by investment funds as well as the new preferences of managers—resulting from their changing educational background and compensation schemes—on the financialization of firms. Focusing on the Swiss machine industry, we analyse the erosion of traditional non-market mechanisms of corporate control and finance and the adoption of a liberal corporate governance system. We then discuss the consequences of the reorientation of firms towards shareholders' interests. Takeovers and strategic controls, disinvestments, mergers and layoffs appear as a consequence of investor pressures and new managerial preferences. The erosion of the strong links between firms and banks and with other industrial firms in the networks of interlocking directorships also shows the decline of non-market forms of coordination. The Swiss experience of financialization finally suggests a fine-tuning of the current concepts apprehending the trajectory of ‘coordinated market economies’.

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