Corporate Governance and the Voice of the Paparazzi

Abstract

This is one of a group of papers, at Brookings awaiting publication, celebrating the remarkably sustained value of Albert Hirschman's "Exit, Voice & Loyalty," published in 1971. Those who know that book -- and everyone should -- recognize that exit-voice has particular relevance in corporate governance. It is a conundrum: shareholders "exit" at a turnstile pace -- turnovers of 75% a year in NYSE stocks -- and shareholder "voice" only from a handful of state/local pension funds. Why then has the American corporation come to be seen as the paradigm? The paper focuses on the exceptionally high degree of financial transparency here, far better than elsewhere, which with the high degree of public confidence and interest engendered thereby have produced an extraordinary level of media attention -- the voice of the analysts and other paparazzi -- helping greatly to explain the palace upheavals at GM, Kodak, Westinghouse and elsewhere. Far from being an isolated phenomenon, it is simply one aspect of a society and market structure that could function well only with pervasive sunshine. The paper looks also at Germany, Japan, and (ach!) So. Korea and the like.