Investors use a range of subtle strategies to ensure compliance with their wishesInvestors use a range of subtle strategies to ensure compliance with their wishes


Partnership - Nascent Capital Markets funded the Industrial Revolution

In the dawn of modern industry, the creation of markets for capital was a breakthrough innovation. Without it, the first Industrial Revolution would not have happened.
Prior to this, owners struggled to attract capital needed to invest in growth and technology. The emergence of capital markets brought together those with cash to invest and capital-hungry enterprises.
For more than a century, the system worked well - managers were responsible for creating value in the customer-markets - investors provided the capital for growth, and expected a fair return for their investments.

The fundamental facts behind value creation:

The system becomes distorted.

In the 1930's there was a lively debate about the roles and rights of investors. Tawney, Keynes and others advocated limiting the rights of 'rentiers' because they simply supplied money and did not add value to enterprises.
The balance between managers as value-creators and investors changed radically in the post-war period as a number of ideas became generally accepted:

The effects.

See FTSE 100 for the facts.
Currently, a more extreme version of value extraction is emerging in the form of private equity funds - which are set up to generate huge rewards for investment and company managers - representing an extreme version of the Agency Theory concept.

We are left with a version of shareholder capitalism that is fixated by value extraction at the expense of value creation. - and captures huge rewards for a tiny minority.
Healthy, sustainable enterprise is now commoner in non-quoted sectors of the economy. Foreign-owned companies, partnerships such as John Lewis, smaller private companies, family-owned companies and social purpose enterprises are carrying the UK economy.
We will not return to health in the capitalist economy until there is a fundamental re-alignment of interests and rewards between the providers of capital and those stakeholders who create real value.

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