Unintended Benefits of Empowering Boards in Conglomerates: A Case Study of AFK Sistema
The paper investigates the role of corporate governance institutions at the subsidiary level in conglomerates in emerging markets. The literature typically highlights that these institutions are necessary to reassure minority shareholders and thus to attract investors. We show that corporate governance institutions, particularly supervisory boards, can be applied for a different purpose – to organize communication within a group and thus to improve the quality of strategy formulation. Thus, a conglomerate can empower its subsidiary boards even if there is no immediate IPO goal for them. The paper uses a case study of a large Russian business group, AFK Sistema, to explore this mechanism, its advantages and its limitations.