Financial Times’ Columnist questions shareholder’s role

Financial Times’ columnist, Martin Wolf, gave a speech at ICNG’s Annual Conference that left the audience, composed by institutional investors, surprised, as he suggested the possibility of the model of corporate power based on the shareholder to be incorrect.
According to Wolf, nowadays, shareholders lack the capacity to exercise their ultimate power of decision in publicly held companies. Moreover, he perceives as false the scholarly argument which supports the power of the shareholder – his position of “residual claimant” (ie, non-contractual) over the company’s results. Institutional investors would be able to eliminate such a residual risk through diversification, while other stakeholders, like employees, would not have this capability. Therefore, they would be at a higher position of risk than shareholders.
In addition, Wolf cited the example of banks, where shareholders sometimes contribute less than 5% of total capital, while creditors, depositors, and taxpayers cover the largest risks (given the role of the government either as an implicit or explicit enforcer of liabilities).
Technically, these factors would justify the exploitation of alternative control models, such as the Supervisory Board present in German companies, which encompass employee participation.
Wolf’s speech heated up the debate. Stilpon Nestor, from Nestor Advisors, criticized Wolf’s view for corrupting the role of public companies, perhaps with an overly socialist understanding of such a role. Nestor perceives the company’s goal as a vehicle to acquire capital for a particular endeavor, which should, therefore, directly serve the shareholders’ will as opposed to an idealized view on social interest. Several participants criticized the consequences of Wolf’s perspective, for its broad application would lead to a scenario where shareholders lacked control of the corporations.