Directors of public companies may be forgiven for wondering just who calls the shots in their boardrooms these days. Many chief executives have come - reluctantly - to the view that their own most critical function is to 'liaise' with key institutional shareholders. The latter, meanwhile, are increasingly prepared to accept dealing restrictions in exchange for the opportunity of discussing the board's current strategy - plus, doubtless, the possibility of influencing it. And as The Power Behind the Putsch (p40) illustrates, the institutional response to those who consistently fail to match expectations is not always confined to selling the company's shares.
Many would argue that this development is long overdue. Institutional shareholders have for decades been criticised for baling out of poorly managed businesses instead of accepting the responsibilities that should go with ownership. The internationalisation of the fund management industry has added a new dimension, further diminishing the influence of the tight City cabal that had been charged with keeping errant boards in line. The corporate governance debate should not ignore many institutional investors' changed perception of their role.