“Real Owners” and “Common Investors”: Institutional Logics and the Media as a Governance Mechanism

• DOI: http://doi.org/10.1111/j.1467-8683.2012.00932.x
• Author: Andreas Jansson
• Date: 01 January 2013
• Published date: 01 January 2013

“Real Owners” and “Common Investors”:

Institutional Logics and the Media as a

Governance Mechanism

Andreas Jansson*

ABSTRACT

Manuscript Type: Empirical

Research Question/Issue: Based on an analysis of Swedish press material covering two corporate scandals, this paper

reveals the institutional logic propagated by the Swedish press pertaining to large shareholders and the relationship

between this institutional logic and the attribution of blame for the scandals to shareholders by the press.

Research Findings/Insights: The results reveal an institutional logic with a clear notion of what constitutes a “real owner,”

which is reminiscent of an understanding of ownership and control prevalent in the literature before the emergence of

agency theory. Real owners are associated with moderation of management, responsibility, long-termism, and legitimate

inf‌luence in the f‌irm. In response to scandals, this institutional logic leads the Swedish press to question the “realness” of

an existing controlling shareholder or, if no controlling shareholder exists, to blame the problem on the absence of a real

owner.

Theoretical/Academic Implications: It is important to understand the institutionallogic propagated by the press to see how

the media functions as a governance mechanism, since a given institutional logic leads the media to “name and shame” in

specif‌ic ways. The institutional logic propagated by the Swedish press differs from what previous research has indicated is

prevalent in the US, suggesting that the media as a governance mechanism has different effects in different countries.

Practitioner/Policy Implications: This paper illustrates the importance of understanding prevalent informal norms when

predicting effects of corporate governance reform and suggests that these informal aspects are highly path dependent.

Keywords: Corporate Governance, Media, Controlling Shareholders, Institutional Logic, Symbolic Management

INTRODUCTION

The media have been suggested as an important gover-

nance mechanism for upholding norms of what is

“socially acceptable” (Dyck & Zingales, 2002). They do this

by “naming and shaming” those transgressing these norms

(Core, Guay, & Larcker, 2008; Dyck, Volchkova, & Zingales,

2008), a practice that can have negative consequences for

transgressors’ reputations and thus harm their future

earning potential (Fama, 1980). In this way, the media may

alleviate agency problems between external shareholders

and management or dominant controlling shareholders

(Dyck & Zingales, 2004).

The picture is complicated by research from the symbolic

management perspective, which suggests that media serve

as “propagators of legitimacy” (Bednar, 2012), enforcing an

institutional logic of appropriate behavior by using positive

coverage to reward f‌irms that adjust to prescriptions of this

logic, even though their reforms may lack both substance

and consequence for external shareholders (Bednar, 2012;

Zajac & Westphal, 1995). The media have even been found

susceptible to manipulation by corporate elites’ use of inter-

personal inf‌luence (Westphal & Deephouse, 2011). One of

the main insights from this perspective, thus, is that media

not merely ref‌lect corporate facts and thereby lower infor-

mation asymmetry between corporate insiders and outsid-

ers, but that they f‌ilter and interpret the information about

corporations in ways that are shaped by certain institutional

logics that def‌ine legitimate behavior. Studies of prevailing

institutional logics that shape the notion of appropriate cor-

porate behavioramong various stakeholder groups stem pri-

marily from the US context. These studies suggest that a not

particularly sophisticated version of agency theory has been

elevated to normative status, thereby def‌ining legitimate

*Address for Correspondence: Andreas Jansson, School of Business and Economics,

Linnaeus University,S-351 95 Växjö, Sweden. Tel: 46-470-708-230, Fax: 46-470-824-78;

E-mail: andreas.jansson@lnu.se

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Corporate Governance: An International Review, 2013, 21(1): 7–25

© 2012 Blackwell Publishing Ltd

doi:10.1111/j.1467-8683.2012.00932.x

corporate behavior for the media (Bednar, 2012) and share-

holders (Westphal & Zajac, 1998). Hendry, Sanderson,

Barker, and Roberts (2006) f‌ind, in contrast, that managers of

institutional investors and corporate executives conceptual-

ize institutional investors in the UK setting as f‌inancial

traders that havelittle to do with the f‌irm and are essentially

different from the long-term owners, which are the real prin-

cipals of the f‌irm. This suggests the prevalence of a different

institutional logic among these stakeholders in the UK.

This paper adds to the literature on the function of media

as a governance mechanism, particularly from the symbolic

management perspective, through a detailed exploration of

the complex relationship between, on the one hand, the pre-

vailing institutional logic of the media and, on the other

hand, the media’s choices of who or what to “name and

shame” in a non-US setting. This relationship has been

explored within the US context in terms of statistical asso-

ciations between, for example, symbolic reforms in line with

agency theory and positive/negative press (Bednar, 2012) or

stock price reactions (Westphal & Zajac, 1998). This study

uses a different approach: a qualitative analysis of a large

volume of articles produced by the Swedish press pertaining

to two corporate scandals, one involving Skandia and

the other ABB. These scandals, which were major media

happenings in Sweden (Jonsson, Greve, & Fujiwara-Greve,

2009; Kallifatides, Nachemson-Ekwall, & Sjöstrand, 2010;

Nachemson-Ekwall & Carlsson, 2004), were covered from

various angles in the press, e.g., what really happened, who

or what was to blame, consequences for corporate gover-

nance, and impacts on the market economy. They were also

cited as a key motivator behind the government’s formation

of the “Commission of Trust,” which initiated the creation of

the Swedish corporate governance code in 2004 (Jonnergård

& Larsson, 2007).

The US media, where an institutionallogic imprinted with

agency theory prevails (Bednar, 2012; Zajac & Westphal,

1995), operates in the context that agency theory was origi-

nally developed to f‌it. Unlike the US with its comparatively

dispersed corporate ownership (La Porta, Lopez-de-Silanes,

& Shleifer, 1999), in Sweden, corporate governance has a

history of concentration of control in the hands of inf‌luential

controlling shareholders (Agnblad, Berglöf, Högfeldt, &

Svencar, 2001; Collin, 1998; Henrekson & Jakobsson, 2012;

Högfeldt, 2005; La Porta et al., 1999). A study of the institu-

tional logic in the Swedish press thus allows for ample

opportunities to explore whether the elevation of agency

theory as normative blueprint for proper corporate behavior

also prevails in contexts with an entirely different history of

ownership and control, in which agency theory also appears

less well suited for explaining corporate behavior(Jansson &

Larsson-Olaison, 2010), or if media monitoring may incen-

tivize entirely different types of behavior in such contexts.

Ascertaining this is important, as it helps determine whether

to incorporate, or rule out, context dependency of what kind

of behavior the media may induce as a relevant element of

the theory of the media as a governance mechanism.

Because of the dominant position of controlling share-

holders in monitoring f‌irms in the Swedish context, the

paper focuses on those aspects of the institutional logic pre-

vailing in the media pertaining to legitimate behavior by

large shareholders, which is likely to give an indication of

the institutional beliefs regarding proper governance of

f‌irms held more generally. Specif‌ically, the research question

addressed in the paper is twofold: First, what institutional

logic pertaining to large shareholders does the Swedish

press propagate in the two scandals under consideration?

And second, how does this institutional logic relate to

the press’s attribution of blame for the scandals to large

shareholders?

The results reveal an institutional logic with a clear notion

of how a “real owner” should act. Owners not able to fulf‌ill

this role are seen as less than a real owner, as a “common

investor.” The notion of what constitutes a real owner is

reminiscent of a conception of the function of shareholders

in f‌irms prevailing before the ascendency of agency theory:

It is an active owner that takes direct care of his/her prop-

erty and thus moderates corporate excessesand avoids scan-

dals. The real owner is typically associated with a number of

attributes that def‌ine legitimate behavior, such as moral

guidance of management, responsibility towards stakehold-

ers and the f‌irm, long-term orientation, being motivated by

the f‌irm’s best interests, and to some extent competence.

In the cases studied here, the prevailing institutional logic

led the media to blame the scandals on the lack of a real

owner when an owner with such qualities did not exist and

to devalue the “realness” of a controlling shareholder other-

wise categorized as a real owner. Since a real owner is typi-

cally represented as holding legitimate power and inf‌luence

in the f‌irm (in contrast to a common investor), it is likely

important for large owners with a desire to exert control

over the f‌irm to be def‌ined by the media as real owners to

secure legitimacy and support among stakeholders (Pfeffer

& Salancik, 1978/2003).

There have lately been general calls for more research on

how informal norms and social control affect corporate gov-

ernance (Boytsun, Deloof, & Matthyssens, 2011; Nicholson,

Kiel, & Kiel-Chisholm, 2011). This paper contributes to this

literature in general and to the literature on the media as a

governance mechanism in particular (e.g., Bednar, 2012;

Core et al., 2008; Dyck et al., 2008; Dyck & Zingales, 2002;

Westphal & Deephouse, 2011) by demonstrating both that

the prevailing institutional logic used by the media should

be seen as an intermediate variable between corporate prac-

tices and how the media “name and shame” and that this

institutional logic varies across contexts. While US studies

indicate that agency theory has been elevated to form the

blueprint for appropriate corporate behavior in that country

(Bednar, 2012; Westphal & Zajac, 1998; Zajac & Westphal,

1995), this analysis shows that the Swedish press draws on a

view of the appropriate role for large shareholders more

akin to ideas f‌lourishing in the literature on ownership and

control that precede agency theory. Hence, the prevailing

institutional logic is an important variable for understanding

the functioning of the media as a governance mechanism,

and the media uphold different sets of norms in different

corporate governance contexts. Based on this study, it is

merely possible to speculate about the origins and effects

of the institutional logic pertaining to large shareholders

that prevails among the Swedish media; but the norms

associated with this institutional logic are consistent with

the specif‌ic history of Swedish ownership and control, a

history that is characterized both by inf‌luential controlling

8CORPORATE GOVERNANCE

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