Channels of Convergence: Investor Engagement and Interlocked Directorates

Abstract

In a setting of globalized financial capitalism an issue which has received little attention to date is not whether national models of corporate governance are converging or diverging but rather the channels by which market and regulatory forces interact to promote such convergence or divergence. I herein propose the institutional investor/interlocked directorate pipeline as one such channel of potential convergence. In theory, institutional investors impart tacit knowledge to a select group of corporations by means of engagement activities; such knowledge and influence can subsequently be distributed to a wider corporate population by means of interlocked directorates originating from the engaged corporations. An analysis of the distribution of these pipelines across Canada demonstrates that such pipelines can penetrate geopolitical and industrial boundaries and interact with regulatory forces in shaping models of corporate governance. The wide distribution of such pipelines effectively transforms tacit knowledge originally conveyed by institutional investors to a geographically limited sample of corporations into explicit knowledge accessible across the country.