Turning Pirate into Captains: Institutional Entrepreneurs, Pension Funds and Patient Capital in Liberal Market Economies

As they hold a growing share of assets in Liberal Market Economies’ capital markets, pension funds are a core element of Anglo-Saxon financial systems and have typically been considered as champions of the doctrine of (short-term) shareholder value maximization. Yet not all pension funds promote this doctrine. This paper shows how, following several waves of hostile takeovers and high-profile corporate failures in the 1980s, a number of American and British institutional entrepreneurs tried to turn their countries’ pension funds into providers of patient capital who would voice their concerns about company managers’ performance through shareholder activism rather than by selling their shares to the highest bidder. This push for shareholder activism was motivated by a willingness to improve firms’ long-term value creation and, increasingly, managers’ relationship with their firms’ other stakeholders. The argument is illustrated with case studies of American and British corporate governance debates since the 1980s.