The third, systems stage of corporate governance: Why institutional investors need to move beyond modern portfolio theory

This paper focuses on underlying causes for the emerging systemic emphasis among major corporate governance institutional owners. It does this by building incorporating three stages of corporate governance: structure and process as governance (stage I), broadening to include E and S factors (stage II), and stage III, a system focus. By looking at system focus this paper breaks ground by arguing one must examine the role modern portfolio theory (MPT) in the investment processes and explore how MPT impacts corporate structure, behavior and governance.