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My understanding is that ownership and control are different things. Yes, boards sign off on the really big decisions by businesses, review accounts etc, but they have little say in the day to day business operations. Most board members (excluding inside directors) aren't experts in the industries they have ownership in, so they give a lot of leeway to the C-Suite to set business objectives, strategy, and budgets. They meet now and again to review and sign-off on those strategies and make sure the accounting and thinking behind them is sound. A board meeting for a company might go like: "This year, our target is to increase EBITDA by 5%, to do that, we intend to invest X million into building new product 4, which will generate Y million in its first year, we're also forecasting that existing products 1, 2, and 3 will generate Z million to hit those targets. Here's some growth charts for those products that show that we're confident in hitting the numbers." The board members ask some probing questions e.g. key risks behind those numbers like "Ok but your competitor also launched product 3 last year, do you think you'll maintain market share" and the C-suite will present evidence to show that they will, the board then signs off on the strategy. So the board isn't really controlling the organization beyond making sure they're thinking their numbers through and aren't doing whacky things like selling oranges if they make radiators or whatever, or rarely intervening where the CEO keeps making bad decisions. Blackrock and Vanguard are investment management companies, which means banks, pension funds etc that invest money with the hope to make it grow give them their money to manage. They use some crazy smart tech to work out how to allocate that money between different companies to make it grow optimally. That gives them controlling stakes in many boards, but their role is pretty much limited to what I mentioned above (though Blackrock has been encouraging companies to have ESG policies / diverse C-Suites recently, much to the ire of the right). Caveat to say that this is very much a layman's understanding. I don't have an MBA or anything. I just work in a senior role that involves explaining complex financial stuff to the public and that's how I understand it from osmosis talking to executive folks.
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Apr 18, 2023 15:40
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| # ¿ May 10, 2024 21:17 |
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