EVOLUTION OF CORPORATE GOVERNANCE TOWARDS INTRINSIC VALUE

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Hugh Grove, James C. Lockhart

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Abstract

The major research question addressed by this paper is how to evolve corporate governance beyond its traditional shareholder focus towards the broader perspective of a stakeholder focus with intrinsic value. Intrinsic value refers to the monetary value of a company, stock, currency, or product determined by fundamental analysis, without reference to extant market value. It is ordinarily calculated by summing the discounted future income generated by the company, stock, currency or product to obtain its present value. In this paper we observe the evolution of corporate governance towards an intrinsic, long-term value focus by the boards of directors, corporate executives, owners and shareholders, regulators and legislators, and other stakeholders. These major players are encouraged to develop more wisdom in order to assess the emerging threats, challenges, and opportunities from technology for intrinsic value, especially with the perspective of the public corporation as a separate legal personhood, as advocated by the European Parliament’s Committee on Legal Affairs in 2015. The rapid increase in the development of artificial intelligence (AI) and other technologies has tremendous significance for these major players broadly contributing to effective corporate governance. To facilitate the development and evolution of intrinsic value for public corporations and other entities, these major players need wisdom for more effective corporate governance in challenging times. Accordingly, this paper discusses the evolution of corporate governance and board members’ perspectives from a shareholder focus to a stakeholder focus with intrinsic value; the key success factor being wisdom for boards; the three-dimensional wisdom scale; and, the AI challenge, including the “Deadly Soul” of a new machine, to the wisdom of company executives and their boards of directors.

Keywords: Corporate Governance, Intrinsic Value, Wisdom

Received: 24.01.2019
Accepted: 20.03.2019
Published online: 21.03.2019

JEL Classification: G30

How to cite this paper: Grove, H., & Lockhart, J. (2019). Evolution of corporate governance towards intrinsic value. Corporate Law & Governance Review, 1(1), 8-13.