Governance by Institutional Investors in a Stakeholder World

2015 ◽  
Author(s):  
Gerard Hertig
Keyword(s):  
Corporate Governance ◽  
Institutional Investors ◽  
Institutional Investor ◽  
Pension Funds ◽  
Societal Impact ◽  
Investment Strategies ◽  
Stakeholder Interests

This chapter examines the increased attention paid to stakeholder interests and its economic or, at least, societal impact, and whether giving a new or stronger voice to stakeholders is justified. It first provides an overview of recent stakeholder-oriented reforms and their impact before assessing the merits of giving stakeholders a new or reinforced voice in terms of corporate governance. It then turns to the hypothesis of having institutional investors act as stakeholder representatives as well as the extent to which their ultimate beneficiaries can contribute to institutional investor governance. It also explores whether the ultimate beneficiaries of pension funds can have the option to choose between shareholder and stakeholder-oriented investment strategies.

scholarly journals Corporate governance and corporate investment: an exploratory research in the Brazilian publicly traded companies listed in Bovespa

2011 ◽  
Vol 9 (1) ◽  
pp. 545-557
Author(s):  
Nádia Sousa ◽  
Flávia Zóboli Dalmácio
Keyword(s):  
Corporate Governance ◽  
Institutional Investors ◽  
Market Value ◽  
Institutional Investor ◽  
Capital Cost ◽  
Exploratory Research ◽  
Statistical Relation ◽  
Publicly Traded ◽  
Publicly Traded Companies ◽  
Governance Practices

This paper aims to study the influence of Corporate Governance practices in the institutional decision to invest. It was developed a Governance Index (iGov), a descending rank was prepared and a test was applied to check if the companies in the first 25% of this rank have the highest number of institutional investors among their biggest investors than the companies of the last 25%. For the validation of IGov it was tested if the companies with the best marks present highest Returns, lowest Capital Cost, highest Market Value, and highest Competiveness within the sector, lowest Beta, highest EVA® and lowest Share concentration. It has been proved that the best Corporate Governance practices do not have any statistical relation with the presence of more Institutional Investor.

scholarly journals Large pension funds and the corporate governance practices of Brazilian companies

2012 ◽  
Vol 9 (2) ◽  
pp. 76-84 ◽  
Author(s):  
Rodrigo Miguel de Oliveira ◽  
Ricardo Pereira Câmara Leal ◽  
Vinicio de Souza Almeida
Keyword(s):  
Corporate Governance ◽  
Institutional Investors ◽  
Pension Funds ◽  
Brazilian Government ◽  
Good Corporate Governance ◽  
Political Views ◽  
Governance Practices ◽  
Corporate Governance Quality ◽  
The Impact

We do not find any consistent evidence that the presence of the largest Brazilian pension funds as relevant shareholders is associated to higher corporate governance scores by public Brazilian companies. Even though companies with institutional investors as relevant shareholders presented a higher average corporate governance score than other companies, they were also larger and had greater past profitability than other companies, which are common attributes of firms with better corporate governance according to the literature. The impact of Brazilian institutional investors on the corporate governance quality of their investees is either negligible or cannot be captured by the proxies we employed. Finally, we note that these two pension funds may represent the policy and political views of the incumbent Brazilian government and that the actions of their board appointees may or not reflect what is understood as good corporate governance practices.

Changes in ownership forms and role of institutional investors in governing public companies in Malaysia

2015 ◽  
Vol 11 (4) ◽  
pp. 455-475 ◽  
Author(s):  
Hairul Azlan Annuar
Keyword(s):  
Corporate Governance ◽  
Institutional Investors ◽  
Institutional Investor ◽  
Governance System ◽  
Public Companies ◽  
Content Type ◽  
Investment Companies ◽  
Corporate Governance System ◽  
Different Types

Purpose – The purpose of this paper is to ascertain whether different types of institutional investor in Malaysia are involved in the corporate governance of their investee companies, and, if yes, to what extent is the level of the involvement. Design/methodology/approach – A qualitative approach, consisting of a series of interviews with 18 senior investment managers of different types of institutional investor, was chosen. Findings – The findings suggest that lessons learnt from the fallout of the Asian crisis has made Malaysian institutional investors not only to be more prudent in managing their total funds and in making equities investment decisions, but has resulted in a more active participation in their “core” investee companies apart from merely discharging their voting rights. Interview analysis revealed that government-linked investment companies are championing the cause and could possibly affect the overall level of institutional investors’ involvement, which bode well for the future of the corporate governance system of the country. Research limitations/implications – Generalisations may be an issue when interviews are used as the method of inquiry. Also, the sample is not random, as access to many managers depended on recommendations. In addition, respondents were consciously selected to obtain different types of institutional investors that included government and non-government linked. Originality/value – There is a lack of work on studying the involvement of institutional investors in developing countries, whereby previous work and literature review were predominantly based upon the experience of Western economies.

scholarly journals Can Institutional Investor Clique Play a Governance Role? Based on the Perspective of Insider Reduction

2021 ◽  
Vol 235 ◽  
pp. 01066
Author(s):  
Yuxiang Peng ◽  
Bingxiang Li
Keyword(s):  
Corporate Governance ◽  
Social Network ◽  
Institutional Investors ◽  
Significant Positive Correlation ◽  
Institutional Investor ◽  
Financial Industry ◽  
Interactive Behavior ◽  
The Social ◽  
Role Based ◽  
Grouping Behavior

This article takes China’s A-share non-financial industry listed companies from 2007 to 2015 as a sample, starting from the social network algorithm, to study whether the grouping behavior of institutional investors in the network can affect the degree of executive reduction in the future. The study found that there is a significant positive correlation between the shareholding ratio of institutional investors in group holdings and the degree of future reduction of executives. This article explores the interactive behavior of Chinese institutional investors in the network, and expands the research of institutional investors on corporate governance and executives’ future reduction behaviors.

Institutional Investor Voting Behaviour

2021 ◽  
pp. 227-262
Author(s):  
Luca Enriques ◽  
Alessandro Romano
Keyword(s):  
Corporate Governance ◽  
Institutional Investors ◽  
Institutional Investor ◽  
Geographical Proximity ◽  
Voting Behaviour ◽  
Current Policy ◽  
Policy Issues ◽  
Common Ownership ◽  
Asset Managers ◽  
Shed Light

This chapter shows how network theory can improve our understanding of institutional investors’ voting behaviour and, more generally, their role in corporate governance. The standard idea is that institutional investors compete against each other on relative performance and hence might not cast informed votes, due to rational apathy and rational reticence. In other words, institutional investors have incentives to free-ride instead of ‘cooperating’ and casting informed votes. We show that connections of various kinds among institutional investors, whether from formal networks, geographical proximity, or common ownership, and among institutional investors and other agents, such as proxy advisors, contribute to shaping institutional investors’ incentives to vote ‘actively’. They also create intricate competition dynamics: competition takes place not only among institutional investors (and their asset managers) but also at the level of their employees and among ‘cliques’ of institutional investors. Employees, who strive for better jobs, are motivated to obtain more information on portfolio companies than may be strictly justified from their employer institution’s perspective, and to circulate it within their network. Cliques of institutional investors compete against each other. Because there are good reasons to believe that cliques of cooperators outperform cliques of non-cooperators, the network-level competition might increase the incentives of institutional investors to collect information. These dynamics can enhance institutional investors’ engagement in portfolio companies and also shed light on some current policy issues such as the antitrust effects of common ownership and mandatory disclosures of institutional investors’ voting.

Exercising the ‘governance option’: labour’s new push to reshape financial capitalism

2019 ◽  
Vol 43 (4) ◽  
pp. 891-916 ◽  
Author(s):  
Stephen F Diamond
Keyword(s):  
Corporate Governance ◽  
Hedge Funds ◽  
Institutional Investors ◽  
Balance Of Power ◽  
Pension Funds ◽  
Common Stock ◽  
Governance Mechanisms ◽  
Progressive Change ◽  
Financial Capitalism

Abstract New forms of stockholder activism call into question longstanding assumptions underpinning our system of corporate governance. Scholarship has largely failed to explain the basis for these new forms and, in particular, the differences among activists. Activists are not one undifferentiated mass. Both small activist hedge funds and large union-sponsored or -influenced pension funds use governance mechanisms to influence corporate behaviour. Pension funds, however, have a different set of incentives than hedge funds. The beneficiaries of these funds cannot easily switch between consumption and investment by buying or selling their holdings in firms. Thus, instead, institutional investors exercise an embedded ‘governance option’ found within shares of common stock to engage with firms. Organised labour, in particular, now uses its influence in pension funds to motivate progressive change by corporations. This form of activism has the potential to alter the balance of power between workers and capitalists in the era of financial capitalism.

scholarly journals Corporate governance in Italy after the 1998 reform: What role for institutional investors?

2005 ◽  
Vol 2 (4) ◽  
pp. 11-31 ◽  
Author(s):  
Marcello Bianchi ◽  
Luca Enriques
Keyword(s):  
Corporate Governance ◽  
Empirical Analysis ◽  
Mutual Fund ◽  
Institutional Investors ◽  
Conflicts Of Interest ◽  
Institutional Investor ◽  
Active Role ◽  
Listed Companies ◽  
Legal Environment ◽  
Investor Activism

his paper tries to answer two questions: first, whether the changes in the law resulting from the 1998 reform are able to positively affect the attitude to activism of institutional investors in Italy; and second, whether, legal rules aside, it is reasonable to expect significant institutional investor activism in Italy. We provide both an empirical analysis of the factors affecting institutional investor activism in Italy and a legal analysis of the most relevant changes in the Italian mutual funds and corporate laws, following the 1998 reform. The empirical analysis shows that institutional shareholdings and investment strategies are compatible with the hypothesis that institutional investors can play a significant role in the corporate governance of Italian listed companies. However, a curb to their playing such an active role may derive from the predominance of mutual fund management companies belonging to banking groups (giving rise to conflicts of interest) and from the prevailing ownership structure of listed companies, which are still dominated by controlling shareholders holding stakes higher than, or close to, the majority of the capital (implying a weaker bargaining power of institutions vis-à-vis controllers). The analysis of the legal changes prompted by the 1998 financial markets and corporate law reform indicates that the legal environment is now definitely more favorable to institutional investor activism than before. However, the Italian legal environment proves still to be little favorable to institutional investor activism, when compared to that of the U.S. or the U.K.

The evolution and alignment of institutional shareholder engagement through the King and CRISA reports

2020 ◽  
Vol 11 (2) ◽  
pp. 147-153
Author(s):  
Richard Foster
Keyword(s):  
South Africa ◽  
Corporate Governance ◽  
Institutional Investors ◽  
Shareholder Activism ◽  
Institutional Investor ◽  
Historical Narrative ◽  
Content Type ◽  
Shareholder Engagement ◽  
On The Road ◽  
High Level

Purpose The purpose of this study is to provide a high-level review of the evolution of shareholder activism and institutional investor engagement in the corporate governance ecosystem in South Africa. Furthermore, it specifically seeks to explain the incorporation of such aspects into the various key codes and reports on corporate governance in South Africa since 1994. Design/methodology/approach Historical narrative and analysis. Findings This study highlights how shareholder activism and institutional investor engagement in the corporate governance ecosystem have been considered and addressed in South Africa since the publication of the First King Report in 1994. The progress that has been made specifically with regard to the introduction of a code for institutional investors is highlighted. The study ultimately acknowledges that this evolution is a continuing journey on the road to stakeholder inclusivity and engagement, and then concludes that the specific role and impact of institutional investors, particularly given some of the recent corporate governance failures, will require further consideration going forward. This should ensure the continued alignment of all stakeholders and assist in making the necessary improvements to the overarching governance framework and attendant culture. Originality/value This study is a part of a special issue that looks at the contribution of the King reports to governance globally.

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