3CL Travers Smith Seminar: 'Shareholder Engagement by Large Institutional Investors'

Speaker: Dr Suren Gomtsian (University of Leeds)

While shareholder engagement has captured much attention recently, the evidence on the role of large institutional investors remains relatively scarce. Large fund families have become an increasingly powerful force since the financial crisis of 2008, but the prevailing view holds that fund managers avoid active shareholder engagement. This study aims to contribute to the ongoing discussions about the stewardship role of large institutional investors by revealing how the biggest investors in companies listed on the London Stock Exchange behave and vote at shareholders’ meetings. The results show growing shareholder stewardship efforts by large asset managers, including index (often described as passive) fund managers, over the last five years and thus challenge some common assumptions about large institutional investors. The study also reveals that the primary target of investor oversight by large fund managers has been corporate governance standards, rather than business strategy or performance. Top asset managers are thus taking the role of the promoters of the universally recognised governance standards and actions addressing global challenges, but they are weak as operational monitors. These findings have important implications and will better inform discussions and efforts to build regulatory frameworks for effective shareholder engagement in publicly-traded companies. The results suggest that regulators need to remain realistic by not placing impractical engagement expectations on large institutional investors alone. To go beyond governance engagement, regulatory efforts need to take a broader approach towards investor stewardship and shareholder rights. In particular, hedge funds and other shareholder activists can improve corporate strategy and operational oversight by supplying large fund managers with firm-specific information through activist demands.

3CL runs the 3CL Travers Smith Lunchtime Seminar Series, featuring leading academics from the Faculty, and high-profile practitioners. For more information on past events including recordings, please refer to the Centre activities page.

For all seminars in B16, lunch will be available beforehand in the Basement atrium area. There is no charge for lunch or to attend the seminar.

Enquiries to: 3cl@law.cam.ac.uk