Jackson on governance

Still, let us pursue the argument. It seems clear that the gap – the so-called agency problem – has indeed been widening in the developed world in recent years.

One main reason for that has been the extreme dispersion of the shareholder base. That in turn has various causes, ranging from the reduced involvement of domestic life and pension funds to the advent of high-frequency trading.

But, taken with the globalisation of big companies’ shareholder registers, this can make boards unclear on what the owners want, or indeed who they are. And that can create uncertainty and short-termism in strategy.

Added to that, the big institutions have farmed out their investing to fund managers, thus further attenuating the link between board and owners. And market regulation has, with the best intentions, in effect stifled communication. Boards can only talk to the owners once a quarter, through official announcements. Anything they say in between can only be repetition.

Compare the eastern model, where companies are largely owned and controlled by governments or their sovereign wealth funds. The resulting conduct of boards, according to one veteran UK banker with experience in Singapore, can be “chillingly effective”.