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Young Money

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Professors Observe How Millennials Are Driving Corporate Change

t times dismissed by members of the older generation, millennials and their social views are earning new respect from one of the traditional quarters of the old guard — the corporate boardroom. That’s the finding of a pair of UVA Law professors and their co-author in a new paper.

Last year, the Business Roundtable, a consortium of CEOs for the nation’s largest firms, announced in a public statement that corporations have an ob­ligation to serve the interests of not just shareholders, but also employees, customers and society at large.

Professors Michal Barzuza and Quinn Curtis, and Professor David Webber of the Boston University School of Law, say they see a straight line between the announcement and the research in their recent paper, “Shareholder Value(s): Index Fund Activism and the New Millennial Corporate Gover­nance,” forthcoming in the Southern California Law Review.

The paper argues that, as millennials advance social goals, they are also helping to shape corporate governance — and that new ways of thinking about social goals in conventional corporations are now required.

The younger generation, to put it bluntly, is coming into money.

“Millennials are just starting to enter the phase of their lives where they will accrue a lot of wealth,” said Curtis, the Albert Clark Tate, Jr., Profes­sor of Law. “The competition to manage that wealth is underway and a key dimension of that competition is going to be funds demonstrating that they share millennial values.”

The professors say index funds, which consist of a portfolio of companies meant to track with a market index such as Standard & Poor’s 500 Index, are the fulcrum for corporate change because they are most susceptible to social pres­sure.

“Millennials place a premium on social values in their invest­ments,” they write. “With prices for index funds already cut to the bone, and investment performance an ir­relevant consideration for index investors, index funds must seek out dif­ferentiation in the market where they can find it. Using their voting power to promote their investors’ social values, and doing so publicly and loudly, is a way for these funds, which otherwise risk becoming commodities, to give investors a reason to choose them.”

They note that index funds are now the largest shareholders in many large companies, and that social activism exerted via index funds has led to greater gender diversity on corporate boards and new sustainability prac­tices, among other changes.

Barzuza researches and teaches corporate law, corporate governance, corporate finance, regulatory competition, and law and economics. Curtis teaches courses on corporate law, securities and venture capital.

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