Can Reform of Corporate Governance Boost US Stocks Appeal and Economy?

According to the Daily Signal are the following insights provided in Part I by the two authors as shown below. Part II provides added insights plus other topics.

Sanjai Bhagat
Sanjai Bhagat, Ph.D., is a professor at the University of Colorado, serves on corporate boards, and is the author of “Financial Crisis, Corporate Governance, and Bank Capital.”

Siri Terjesen@siriterjesen
Siri Terjesen is a professor and associate dean at Florida Atlantic University College of Business, serves on nonprofit boards, and advises think tanks on business policy issues.

Part I

President Donald Trump’s America First Investment Policy touts that welcoming foreign investment and strengthening the United States’ “world-leading private and public capital markets will be a key part of America’s Golden Age.”

Of the $124 trillion market capitalization of the global stock market, U.S. stocks account for 49%, and international investors own 17% of those U.S. stocks. By comparison, Chinese stocks comprise 13% of the global stock market, and international equity ownership of Chinese stocks is just 3.4%.

Why does the U.S. stock market dominate internationally? Why are international investors attracted to the U.S. stock market? What can U.S. policymakers do to increase the attractiveness of U.S. stocks?

Americans and foreigners invest in stocks to earn a return commensurate with their risks. What assurance do investors have of receiving a fair return on their investment or, indeed, any return? Corporate governance is the set of processes that assures all investors a fair return on their investment.

The rule of law—as embodied in the respect for private property rights and fair courts that enforce legal contracts—is a necessary precondition to the formation of corporations. For the past two centuries, the U.S. has enjoyed a stable rule of law.

This rule of law and the American focus on investing in human capital, especially in science and technology, provided the building blocks for the formation and growth of corporations. Equally important, this rule of law is critical to international investors, since it gives them the assurance that if they invest in U.S. capital markets, their investments will not be expropriated by the U.S. government or nongovernment entities.

Once a company has received investor/shareholder funds, what prevents managers from using these funds for their own pet projects or from extracting excessive compensation from the company? A multitude of corporate governance mechanisms do just that.

First, U.S. courts have consistently ruled that the purpose of the corporation is to maximize long-term shareholder value while abiding by the law. Corporate charters and board members of U.S. companies often highlight the importance of focusing on long-term shareholder value.

Recently, some U.S. managers have publicly noted that their companies should prioritize environmental and social issues rather than just shareholder value.

However, investors and courts pushed back strongly on this deviation. Currently, U.S. companies, in contrast to many companies in other parts of the world, have resumed their focus on creating long-term shareholder value.

Second, corporate board members, who are the manager’s bosses, can and do monitor the manager’s actions and company performance—out of a sense of fiduciary duty to the shareholders and a concern for their own compensation and reputation.

Third, an active market for corporate control, via takeovers and proxy fights, also provides effective discipline on management. Companies face takeovers and proxy fights when their financial performance has been poor. Subsequent to a takeover or proxy fight, the target company manager’s employment prospects are severely damaged.

Fourth, the incentive compensation structure for U.S. managers has perhaps been the most effective mechanism to encourage U.S. managers to have a laserlike focus in maximizing shareholder value. More than 60% of the average CEO pay in large U.S. corporations is directly linked to shareholder value, hence, that link provides strong incentives to enhance it.

The above market mechanisms have been effective in constraining managers to focus on maximizing long-term shareholder value. However, reforms to these mechanisms could further increase their effectiveness and make U.S. stocks even more attractive to investors—domestic and foreign.

For example, consider the case of CEO incentive compensation. Research has documented the important role of misaligned CEO incentive compensation in the 2008 financial crisis. Surprisingly, similar misaligned incentive compensation played a critical role in the recent demise of Silicon Valley Bank, Signature Bank, and First Republic Bank. Research indicates that these banking crises would have been mitigated if bank CEO compensation consisted only of restricted stock and restricted stock options. Restricted means that CEOs cannot sell shares or exercise options for at least six to 12 months after their last day in office.

Next, consider the case of the proxy advisory market, dominated by two companies, that advises mutual fund managers on how to vote their shares in shareholder meetings on issues related to board governance (e.g., election of board members), management compensation (e.g., structure and amount of cash and incentive compensation), corporate control (e.g., proxy fights, takeovers), and environmental, social, and governance—or ESG—issues. However, there is no consistent evidence that the advice provided is positively related to long-term shareholder value.

The U.S. is the dominant player in the global stock market. U.S. stocks are the preferred investment for most international stock investors. The U.S. rule of law and corporate governance structure has played an important role in establishing and maintaining the dominance of U.S. stock market. With thoughtful corporate governance reforms, the U.S. can further enhance the attractiveness of U.S. stocks to domestic and foreign investors.

We publish a variety of perspectives. Nothing written here is to be construed as representing the views of The Daily Signal.

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Part II - Additional Insights and Other Topics

Dr. Sanjai Bhagat, Ph.D., and Professor Siri Terjesen, associate dean of the Florida Atlantic University College of Business, have raised important points. A few pull quotes from their narrative above can be useful.

...consider the case of CEO incentive compensation. Research has documented the important role of misaligned CEO incentive compensation in the 2008 financial crisis. Surprisingly, similar misaligned incentive compensation played a critical role in the recent demise of Silicon Valley Bank, Signature Bank, and First Republic Bank.

Recently, some U.S. managers have publicly noted that their companies should prioritize environmental and social issues rather than just shareholder value.

Those are topics that have directly or obliquely been periodically raised in this installment "Reality Check" series for this Patch as well as on MHProNews.

An example of the later is linked below.

https://www.manufacturedhomepr...

The article above is an analysis, rather than an endorsement. It is a DEEP dive into specific findings by a hybrid exploration of various AI platforms as shown and industry expertise. Some pull quotes from the item above are warranted.

According to Copilot.

"One major gap in Quiver AI’s analysis is the lack of discussion on broader manufactured housing industry constraints, including:

• Regulatory Failures – The lack of enforcement of MHIA 2000’s enhanced preemption and DTS financing mandates has historically hindered community expansion and buyer affordability.
• Industry Consolidation & Financing Restrictions – Large players within MHI-linked firms (such as Clayton Homes) have limited market competition, affecting both pricing and access to financing.
• Antitrust Concerns in Community Operations – National lawsuits against ELS, Sun Communities, and Datacomp raise concerns about price-fixing and rent inflation, factors that could further limit community expansion and manufactured home shipments."

Legacy Housing (LEGH) is a publicly traded company, as are Equity LifeStyle Properties (ELS), Sun Communities (SUI), Champion Homes (SKY), and Cavco Industries (CVCO). While all are members of the Manufactured Housing Institute (MHI), Legacy is also a member of the Manufactured Housing Association for Regulatory Reform (MHARR). Legacy is NOT generally considered by expert industry watchers as an 'insider' brand at MHI.

Nasdaq is obviously a multi-billion-dollar brand. The report with analysis linked here and above is a critique of Nasdaq's use of Quiver AI without apparent human expertise in their article. It is also an exploration of "hybrid" journalism, the use of human expertise blended with properly disclosed and credibly used AI as a tool for fact-checking and independent or third-party analysis.

A separate report on Legacy Housing (LEGH), based on the information found in the article linked above and here is planned for the near term.

Related and other topics ahead. Thanks for checking in.

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Investors and advocates for more affordable housing and manufactured housing (Cavco (CVCO) Industries, Champion Homes (SKY), Equity LifeStyle Properties (ELS), Berkshire Hathaway (BRK-including Clayton Homes, 21st Mortgage and Vanderbilt Mortgage and Finance) should check this out.

Joe Stegmayer-Tim Larson-Teresa Payne-Lesli Gooch-Manufactured Housing Institute; What’s Behind the Curtain of Manufactured Home Industry Underperformance? Sunday Weekly MHVille Headlines Recap
https://www.manufacturedhomepronews.com/joe-stegmayer-tim-larson-teresa-payne-lesli-gooch-manufactured-housing-institute-whats-behind-the-curtain-of-manufactured-home-industry-underperformance-sunday-weekly-mhville-headlines-reca/

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https://patch.com/florida/lake...

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Real Estate and Conventional Housing Dips, Manufactured Housing Rising

“The single-family home building market is facing competing concerns" said NAHB Chief Economist Robert Dietz.

David Dayen v Carrie Sheffield - Left/Right Views on NPR and PBS Cuts

Dayen says Trump looks 'Weak' for NPR/PBS Cut vs. Sheffield: 'Trump Rightly Defunded PBS-NPR History of Anti-Conservative Pro-Left Content'

Danny Ghorbani-Seeking Alignment with Trump-Turner Vision and MHVille

"My heart is not to grow the amount of people on subsidies," said HUD Secretary E. Scott Turner in recent remarks on Affordable Housing.

DHS to Pay Illegal Aliens to Self-Deport to Save U.S. Time and Money?!

Jacob Adams-"The Department of Homeland Security is offering to pay for illegal aliens to return home to their native countries." Insight$

How Advocates Like Fran Quigley-Robert Reich Shape Housing Narratives

Expert & Copilot Intro: how Corporations-Associations-Nonprofits-Advocates Omit Key Affordable Housing-Manufactured Home Facts+HUD's Turner

Robert Romano - After Trump’s First 100 Days, The Best Is Yet To Come

President Trump Promises as New Tax, Trade and Immigration Policies Take Hold the Joe Biden ‘Overhang’ Will Pass; Romano Presents Evidence.---

‘Endemic Mismanagement of HUD Manufactured Housing Program’ Nom Turner

'Restoring and Expanding Affordable Housing Role of Manufactured Homes'–MHARR Letter Cites 2000 Reform Act, "Enhanced Preemption" Much More

Manufactured Home Groups Split in Transparency Amidst Housing Crisis

Blend of human expertise w/AI fact checks and commentary by Gemini, Copilot, and xAI's Grok help unpack causes-solutions to housing crisis.

Electric Vehicles (EVs) Green? New and Prior Videos Spotlight Issues

Bethany Blankley: 'ICE Arrests Nearly 800 in Miami Florida Operation'

California’s Homeless Crisis Shows Need for Government Accountability

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Top Florida Senate Democrat Quits: 'Dem Party in Florida Is Dead'

ActBlue - Two Sides of a Looming U.S. Democrats vs. Republicans Drama

Big Tech Accused of Crime of Illegally Hiring Immigrants vs. Americans

MHARR-Housing Supply Framework Act Could Benefit New Home Production

Pope Francis dies at 88 - What is next for the global Catholic Church?

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Get Real Evidence for Jesus Christ, Easter & the Resurrection Miracle.

Dealmaker-In-Chief: Trump Given Room for Tariffs As Negotiation Tactic

American Dream of Homeownership is Slipping Away-Association Spotlight

Congressional Lawmakers "Monopoly Busters Caucus" to Fight High Costs

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Young Leaders' Faith Behrens on Gov. Ron DeSantis and Florida's Future

Congress Must Now Cut Taxes and Regulations plus Trump Tariff Insights

ESG Ruling Puts New Pressure on Public Pension Funds and BlackRock

Trump Team Secures Southwest Land Border-Lowest Encounters Since 2000

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Manufactured Housing Misses-Experts and Insiders Critique MHI Failures

Hybrid journalism blends human expertise and insights with AI backed fact checks: "Untapped Potential" "Action Over Apathy" Supplanting MHI

Real Reason Behind Left’s Freak-Out About the Department of Education?

Is There a Recession Ahead? John Carney's Fact-Packed Insight & Answer

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Americans Mostly Support Trump On Deportation vs Activists Fighting it

Manzanita Miller unpacks new survey insight most 'Americans Side With Trump On Deportation—Not w/Activists Fighting For Illegals and Gangs.'

Lakeland Study Test Frank Rolfe Claim "Mobile Homes" Lower Prop Values

Hybrid Expert Human Study Combined with Multiple AI Powered Fact Checks plus 3rd Party Research Expose Disputed Claims in Critical Reporting

Manzanita Miller-Trump Tax Cut Helped Middle Class-Extension Welcomed

According to Manzanita Miller, the "Trump’s Tax Cuts Benefited The Middle-Class And That Is Why Extending Them Is Wildly Popular" LATK FEA--

New Manufactured Home Production Trend UP But Research Raises Concerns

Manufactured Housing Association for Regulatory Reform (MHARR) Released Jan 2025 data that reflects continued improvements since 2023 but...

VP Vance-Illegal Immigrants Squeeze U.S. Citizens from Home Ownership

Bill Wilson - "A Mistake From The Past That Can Be Avoided"

GROK Affordable Housing Crisis Thesis-‘This Ain’t Theory—it’s a Heist’

Fact Checks by Grok-Copilot-Gemini Point to Problems at Manufactured Housing Institute that help Explain 21st Century Manufactured Home Sales

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Is Decline in Christianity in U.S. Over? Pew Research Suggests It Is

Numbers of Those Praying and Attending Religious Services or Mass Have Stabilized According to Recent Findings Including a Big New Pew Study

Feb 2025 sees Lowest Number of Border Crossings in Modern USA History

HUD Sec Scott Turner Tension with HUD Research v Local Zoning Barriers

GROK reports on "Most Comprehensive" article on Sec Turner's recent remarks to WMAL, CPAC, and on challenges to solve affordable housing.

Dems Fretting Over Billionaires Are on Billionaire Dole for Years

Audrey Streb-for DCNF and via Daily Signal: Democratic Officials that Criticized Wealthy Despite Taking Funding from Billionaires (Ouch!)

Rob Romano-Who Controls Foreign Policy? President Or District Courts?

'Sexual Deviants' in Federal Service to be Fired-per DNI Tulsi Gabbard

More on those and other topics in this eclectic "Reality Check" series here on this Patch.

Big Majority Approve DOGE-Plus Political Cartoons to Muse and Amuse

THE Reality Check-All of Us Have Been Manipulated & Lied to-E. Nickson

Dan Bongino to FBI - 'We’re About to See it All. It’s All Coming Out.'

Larry Elder on 'Supercharging the U.S. Economy' Using a Proven Method

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Democrats and GOP both 'Underwater' in New Poll-But Guess Which Leads?

By the Numbers - Evidence of Discrimination Against Believers in God

Employees! It is ‘Not Free Market Capitalism It’s Corporate Feudalism’

HUD Sec Turner-'Corporate Takeover of Housing—A Manufactured Crisis'

'Trump Is Leading a Historic Counterrevolution Against the Deep State'

Federal Racket-Follow the Money-Tammany Hall 2.0 and Big U.S. Media

U.S. Manufactured Home Industry Production 2024 Total Up per MHARR

(Note MHARR is short for the Manufactured Housing Association for Regulatory Reform.)

Scott Turner Confirmed Secretary of Housing and Urban Development-Official HUD+Manufactured Housing Association for Regulatory Reform (MHARR) News Releases; Manufactured Home Generational Wealth

> ‘Endemic Mismanagement of HUD Manufactured Housing Program’ Nom Turner

'Restoring and Expanding Affordable Housing Role of Manufactured Homes'–MHARR Letter Cites 2000 Reform Act, "Enhanced Preemption" Much More...https://patch.com/florida/lake...

> Big Govt, Big Pharma, Big Food made Americans Overweight and Unhealthy

> Virginia Bishop for ‘Well-Regulated Borders’ Amid VP J.D. Vance Rumble

> Romano-Trump Bans DEI In Federal Govt—States And Corporations Are Next

> How Republicans Should Follow Through on Tough Talk on Immigration

> NPR=87 Registered Democrats in Editorial Positions and No Republicans

> President Donald J. Trump’s Official 'America First Priorities'

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> Rubio Senate Replacement Ashley Moody (FL-R) Gets Key Assignments

> Trump Plan: Make America Safe, Affordable, Restore U.S. Values for All

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> Official Manufactured Housing Production from 1995-2023-Why it Matters

> Anna Paulina Luna (FL-R) and Barry Loudermilk (GA-R) MERIT Act Insight

> Executive Orders on Investigating Biden Censorship & Weaponization

> Floridian Dr István Dobozi Strikes at Trump Again in Magyar Article (Another critical analysis - fact check).

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> Why do Liars Lie? Why do those Engaged in Paltering and Spin Palter?

> Controversy-Manufactured Housing Institute-Lesli Gooch-Mark Bowersox

> ‘Mobile Home Values Rising Faster Than Single-Family’ House-Wow Fact$

> Realtor-What Is a Manufactured Home? The Next Step Beyond Mobile Homes

> Orlando RE Agent Smith-Younger Adults Will Need $8500 Monthly for Rent

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> Rob Romano-Time To Declassify Everything, Or Another RussiaGate Ahead

> Contemporary Tips from Legend Paul Harvey-Surprising Rest of the Story

> Alert: Is Affordable Housing Linked Scandal at Champion Homes Brewing?

> Report: Biden-Harris Federal Agencies Spent Millions Torturing Cats

> Lesli Gooch Ph.D.-Award, Coverup, Headfake, Scandal? Rest of the Story (Manufactured Housing Institute linked)

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> ALG Unpacks Trump Pitch to Cut Drug Costs by Cutting PBM Middleman

> Is there Evidence that God Exists? Evolution vs. Intelligent Design

> Democratic Voters-Closer Look at Biden’s Acts Before Biden-Harris Exit

> Christian Leaders-Signs of 4th 'Great Awakening' Millions go to Jesus

> Attorney John Morgan - Democrat Megadonor on Kamala Harris Campaign

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> USA Today - David Plouffe and Dem Advisers on Kamala Harris Revelation

> Majority OK Trump Transition-Mass Deportations-Tariffs- Is it Hopeful?

> Niskanen Center Praises Manufactured Home ‘Cost Savings’ and ‘Quality’

> Alice Carter-The Northern Forum-Deporting Immigrants & Housing Crisis

> Cartoons-Kamala Day 1, DOGE the Swamp, Brainwashing, & Out In the Cold

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> The Creepy Line-Peter Schweizer-Dr. Jordan Peterson-Dr. Robert Epstein

> Secret State Miniseries - Fictional TV Series Shed Light on Reality

> Trump Transition Team Asked to Prioritize Affordable Housing Issues

> Top 10 States for Homelessness & Top Cities for Crime=Shocking Lessons

> WashPost-American Dream Fades But Assoc CEO Mark Weiss Shows Solution

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> Blankley-Goodbye American Dream? Only 10% Polled Can Buy a House; But

> Frank Rolfe-Special Interests ‘Don’t Want to Solve Affordable Housing'

> TARK-‘I’m a Teen and Know the Solution to Affordable Housing Crisis’

---> Renting? Rent too High? Odds Are DOJ Suit vs RealPage Matters to You

> New-Certified “Half Price Homes” - Affordable Housing Solution Redux

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> Solution: “Would-Be Homebuyers Need 80% More Income Than 4 Years Ago”

L. A. “Tony” Kovach is a publisher who has earned multiple awards in history. He and his family live in a manufactured home on private property in Winter Haven, FL. He is the co-founder of Manufactured Home Living News.com (MHLivingNews.com) and Manufactured Home Pro News.com (MHProNews.com), trade publications serving segments of the manufactured home industry. Having worked in several segments of the manufactured home industry for over 3 decades, Kovach is a widely acknowledged and often praised expert on manufactured housing. ###

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