Sovereign Wealth Funds and Corporate Governance: A Minimalist Response to the New Mercantilism

Abstract

Suspension of the voting rights of sovereign wealth funds (SWFs) addresses one facet of the competition between market and new-mercantilist capitalism. It solves the immediate problem at which it is addressed : the use of a portfolio company's corporate governance structure to influence its decisions in a fashion that works to the advantage of the SWF's government owner at the expense of the portfolio company's other shareholders and potentially the host country itself. This solution cannot solve the larger problems that arise from the interaction of different concepts of capitalism, but it can address the most serous risk SWFs pose : that the perception of strategic behavior by foreign state-owned entities will result in a protectionist backlash. ; JEL Classification : F30, G29, G34