Investment Companies as Guardian Shareholders: The Place of the MSIC in the Corporate Governance Debate

Comparative corporate governance is both necessary and hard. Recent scholarship has identified the political and historical contingency of the American pattern of corporate governance. The Berle-Means corporation, with its separation of management and risk bearing and the attendant agency conflict between managers and shareholders, is now widely recognized as being as much a creature of the American pattern of law and politics as the handiwork of neutral market forces. This recognition underscores the need to place the American experience in a comparative perspective. Other patterns of corporate governance can provide both insights into the operation of our own and a source of potential reforms; organizational techniques that have worked elsewhere may be transportable. Nevertheless, the very insight that recommends a comparative perspective also indicates the difficulty of the undertaking. It is not only the American pattern of corporate governance that is contingent. A mature comparative scholarship must ultimately explore the political and historical complexity of every major corporate governance structure. Even before this enterprise is complete, however, comparative analysis can still carry important policy implications for those of us who have the more limited agenda of making incremental improvements in our own governance structures. Foreign techniques can be evaluated in terms of their potential contributions to one\u27s own system, even without a complete understanding of their origins and function in their domestic contexts. In this article, we undertake such a limited exercise in comparative corporate governance as part of a continuing project to devise incremental improvements in the American pattern of corporate governance. Our focus here is a little noted European, and particularly Swedish, form of financial intermediary, which we call a Managerial Strategic Investment Company (an MSIC ), that may be peculiarly suitable for American transplant. The MSIC\u27s special characteristic is that, consistent with non-U.S. corporate governance systems, it is an intermediary that serves as an active monitor of the performance of its portfolio companies. Consistent with the American corporate governance system, however, its only tie to its portfolio companies is its equity investment. Unlike the German and Japanese systems, the link between the financial intermediary and its portfolio companies is one-dimensional