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Article
Publication date: 1 August 2016

Chinyere Uche, Emmanuel Adegbite and Michael John Jones

The purpose of this paper is to investigate institutional shareholder activism in Nigeria. It addresses the paucity of empirical research on institutional shareholder…

Abstract

Purpose

The purpose of this paper is to investigate institutional shareholder activism in Nigeria. It addresses the paucity of empirical research on institutional shareholder activism in sub-Saharan Africa.

Design/methodology/approach

This study uses agency theory to understand the institutional shareholder approach to shareholder activism in Nigeria. The data are collected through qualitative interviews with expert representatives from financial institutions.

Findings

The findings indicate evidence of low-level shareholder activism in Nigeria. The study provides empirical insight into the reasons why institutional shareholders might adopt an active or passive approach to shareholder activism. The findings suggest the pension structure involving two types of pension institutions affects the ability to engage in shareholder activism.

Research limitations/implications

The research study advances our understanding of the status quo of institutional shareholder activism in an African context such as Nigeria.

Practical implications

The paper makes a practical contribution by highlighting that regulators need to consider how the financial market conditions and characteristics affect effective promotion of better governance practices and performance through shareholder activism.

Originality/value

This study draws attention to the implication for shareholder activism of complexities associated with an institutional arrangement where two types of financial institutions are expected to operate and manage the private pension funds in a country.

Details

Corporate Governance, vol. 16 no. 4
Type: Research Article
ISSN: 1472-0701

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Book part
Publication date: 21 October 2013

Nathalie Del Vecchio and Carine Girard

Purpose – This chapter presents the results of an exploratory study carried out on activist institutional investor strategies. It aims to identify the…

Abstract

Purpose – This chapter presents the results of an exploratory study carried out on activist institutional investor strategies. It aims to identify the way in which different types of institutional investors are reacting to new institutional pressures in the French context.

Design/methodology/approach – Our methodology is based on a series of semi-directive interviews, combined with additional relevant data.

Findings – The interpretation of results makes use of institutional theory, more specifically the work of Oliver (1991). Our study shows that active institutional investors may opt for different responses when confronted with new institutional pressures, and that these responses would seem to depend on antecedents underlined by Ryan and Schneider (2002), which in turn depend on the nature of their business relationships with the firm in which they invest. Whereas pressure-sensitive investors (such as banks and insurance companies) generally adopt acquiescence responses, pressure-resistant investors (such as pension funds and investment funds) pursue joint strategies of co-optation, influence or control with key actors such as local and international proxy advisors and French investor associations. Acting conjointly, certain pressure-resistant investors are often considered as institutional entrepreneurs in that they initiate changes and actively participate in the implementation of new norms in the field of shareholder activism in the French context. In parallel to this ongoing professionalization, other pressure-resistant investors such as activist hedge funds seem to lack sufficient legitimate power to be effective.

Originality/value – This chapter illustrates that the level of institutional investor activism depends largely on the relevant national legal framework. It also shows how institutional investor coalitions take advantage of new institutional pressures to enhance their legitimacy or increase the effectiveness of their action.

Details

Institutional Investors’ Power to Change Corporate Behavior: International Perspectives
Type: Book
ISBN: 978-1-78190-771-9

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Article
Publication date: 7 April 2020

Carine Girard and Stephen Gates

This paper aims to demonstrate that state shareholders are confronted with contradictory logics leading to institutional contradictions that activist shareholders can…

Abstract

Purpose

This paper aims to demonstrate that state shareholders are confronted with contradictory logics leading to institutional contradictions that activist shareholders can exploit. The competing logics of the state as shareholder and their impact on corporate governance and shareholder activism offer fertile grounds for research advances in Coordinated Market Economies (CMEs).

Design/methodology/approach

Through an extensive literature review of state ownership, institutional contradictions and shareholder activism, this paper analyzes two case studies involving the French State as shareholder.

Findings

In the French context, these two cases illustrate how institutional contradictions result in opportunities for shareholder activism. By focusing on the institutional contradictions of the state shareholder, this investigation suggests a need for experimental research to observe how shareholder activists adapt to each institutional change in CMEs. This experimentation can help policymakers to avoid creating additional conditions that shareholder activists can exploit.

Research limitations/implications

This focuses only on France and its state shareholdings. To generalize results, studies of other CMEs and state shareholders are needed.

Practical implications

Policymakers should consider all legislative proposals for their potential to deviate from corporate governance practice by experimenting with them in a laboratory setting. Shareholder activists can compare state shareholders’ actions against the state’s legislation to emphasize institutional contradictions that counter minority shareholders’ rights.

Originality/value

This research is the first to analyze how the state as shareholder can exploit its competing logics to resist against shareholder activism and support management or to become itself a shareholder activist.

Details

Corporate Governance: The International Journal of Business in Society, vol. 20 no. 3
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 3 May 2016

Mila Ivanova

This study aims to foster a deeper understanding of socio-ethical shareholder activism by outlining the corporate campaigning strategies of a UK-based non-governmental…

Abstract

Purpose

This study aims to foster a deeper understanding of socio-ethical shareholder activism by outlining the corporate campaigning strategies of a UK-based non-governmental organisation (NGO) and by assessing their impact on both institutional investors and the practices of two multinational companies. As we move into a world where shareholder ownership is becoming more democratised, shareholder activism is gaining prominence in the USA, Europe and Asia, opening new avenues for participation in corporate governance by stakeholders such as NGOs who have traditionally been uninvolved in corporate decisions.

Design/methodology/approach

The article adopts a qualitative methodology and case study research design. It relies on semi-structured interviews, analysis of documents and participant observation.

Findings

First, the study sheds light into the ways in which NGOs are connecting themselves to the financial sector. It argues that they can pursue their political goals by framing their arguments in a way that emphasises the short-term financial risks/benefits for investors. Secondly, it demystifies the term “shareholder activism”, transforming it from an action tool belonging only to big and powerful institutions, to a tool which gives other stakeholders such as NGOs and ordinary people a real stake in companies’ affairs. What is more, the study highlights the divergent nature of institutional shareholder activist intervention in the USA and the UK.

Research Limitations/implications

Given the generally long-term nature of shareholder campaigns, which can sometimes span over several years, it could be beneficial to adopt a longitudinal research design. Future research can endeavour to focus on a number of different campaigns over a period that exceeds three years.

Practical Implications

The research has implications for NGOs adopting a shareholder activist campaigning model and for policy makers aiming to encourage investor stewardship.

Originality/value

The fact that the research field of NGO socio-ethical shareholder activism is relatively new and under-explored by academia, coupled with the growing incidence of the phenomenon in the UK and across the world, as well as its potential benefits for society as a whole, renders further investigation into the topic necessary.

Details

critical perspectives on international business, vol. 12 no. 2
Type: Research Article
ISSN: 1742-2043

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Article
Publication date: 22 September 2020

Patrick Velte and Jörn Obermann

This paper aims to analyse whether and how different types of institutional investors influence shareholder proposal initiations, say-on-pay (SOP) votes and management…

Abstract

Purpose

This paper aims to analyse whether and how different types of institutional investors influence shareholder proposal initiations, say-on-pay (SOP) votes and management compensation from a sustainability perspective.

Design/methodology/approach

Based on the principal-agent theory, the authors conduct a structured literature review and evaluate 40 empirical-quantitative studies on that topic.

Findings

The traditional assumption of homogeneity within institutional investors, which is in line with the principal–agent theory, has to be questioned. Only special types of investors (e.g. with long-term and non-financial orientations and active institutions) run an intensive monitoring strategy, and thus initiate shareholder proposals, discipline managers by higher SOP dissents and prevent excessive management compensation.

Research limitations/implications

A detailed analysis of institutional investor types is needed in future empirical analyses. In view of the current debate on climate change policy, future research could analyse in more detail the impact of institutional investor types on proxy voting, SOP and (sustainable) management compensation.

Practical implications

With regard to the increased shareholder activism and regulations on SOP and management compensation since the 2007/2008 financial crisis, firms should be aware of the monitoring role of institutional investors and should analyse their specific ownership nature (time- and content-driven and as well as range of activity).

Originality/value

To the best of authors’ knowledge, this is the first literature review with a clear focus on institutional investor range and nature, shareholder proposal initiation, SOP and management compensation (reporting) from a sustainability viewpoint. The authors explain the main variables that have been included in research, stress the limitations of this work and offer useful recommendations for future research studies.

Details

Journal of Global Responsibility, vol. 12 no. 1
Type: Research Article
ISSN: 2041-2568

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Article
Publication date: 15 February 2013

Salar Ghahramani

The purpose of this paper is to examine the propensity of sovereign wealth funds (SWFs) for shareholder activism and their potential impact on corporate governance.

Abstract

Purpose

The purpose of this paper is to examine the propensity of sovereign wealth funds (SWFs) for shareholder activism and their potential impact on corporate governance.

Design/methodology/approach

The study highlights the relationships between SWFs and corporate governance and also applies eight antecedents/determinants of institutional activism to analyze whether SWFs have a predisposition for shareholder activism.

Findings

The study only finds two instances of SWF activism. Additionally, it finds that despite their mostly passive investments, SWFs possess a natural tendency toward shareholder activism. Some are more likely to engage in activism than others, however. SWFs with a higher proportion of their assets invested in equities, those with portfolios fully or partially constructed to emulate the broader financial markets through indexing, and those that depend less on external fund managers are the likeliest candidates for activism. The study also finds that the regulatory environment can curb the natural SWF inclination for activist behavior.

Research limitations/implications

Due to the lack of transparency within the SWF universe, this study largely depends on the limited data available for sovereign wealth funds.

Practical implications

Given the growing importance of SWFs, managers, directors, and policymakers must assess SWF activism, its influence on corporate governance, and its implications for public policy deliberations.

Originality/value

This project, to the best of the author's knowledge, is the first study that applies tested financial models to SWFs in order to determine if they have inherent activist tendencies.

Details

Corporate Governance: The international journal of business in society, vol. 13 no. 1
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 12 November 2018

Ambareen Beebeejaun and Jushveer Koobloll

“Shareholder activism works when shareholders understand something about the characteristics of the business that the board doesn’t”. As complex the term shareholder…

Abstract

Purpose

“Shareholder activism works when shareholders understand something about the characteristics of the business that the board doesn’t”. As complex the term shareholder activism may seem, it demonstrates a very simple phenomenon of how shareholder take control of a situation to turn it in their favor. The whole world has taken an activism “twist” where every person has a word to say. The same characteristic of the society is showcased in this paper where engagement of shareholder is questioned whether it helps to promote effective corporate governance. Given the fact that Mauritius has a rather low shareholder activism framework, this research aims to depict the international picture of the issue at different levels to reach a consensus with the local market. It was a major challenge as very little research has been conducted to accurately contrast shareholder activism with corporate governance. However, the international standards aim at giving a clear picture of how the shareholder activism actually functions.

Design/methodology/approach

The research has adopted a black letter approach by analyzing relevant laws and legislations governing corporate governance matters in Mauritius and the USA, Malaysia, France and South Africa. Thereafter, a comparative analysis was made between Mauritius laws and the aforementioned countries. Recommendations were then put forward on the subject matter which is shareholder activism.

Findings

Research has shown development in corporate governance alongside the increase in shareholder activism. However, these research studies fail to prove that the development is because of shareholder activism itself. In fact, it could be because of increase in corporate intellects, removal of trade barriers, sustainable corporate practices and many such changes that have affected the corporate market somehow. Hence, it is difficult to conclude, with certainty, that the driver of good corporate governance is, in particular, the phenomenon of shareholder activism. Nevertheless, many result of shareholder activism has demonstrated a rather positive impact on the ongoing of the corporate dealings and on a personal note, it can be said that shareholder activism is a domain where much research and development should be effected as it represents a promising improvement in the way corporations are governed.

Originality/value

The concept of shareholder activism is quite new to the Mauritius legislation. There has not been research done on whether shareholder activism, particularly, is the reason for corporate success or failure. In this light, this paper aims to analyze shareholder activism practices in other countries and puts forward recommendation in the Mauritius context which may be of use to stakeholders concerned.

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Article
Publication date: 21 September 2010

Pornanong Budsaratragoon, Suntharee Lhaopadchan and David Hillier

We investigate whether limited investor attention is a factor in the effectiveness of institutional shareholder activism. Prior research has shown that an inability of…

Abstract

We investigate whether limited investor attention is a factor in the effectiveness of institutional shareholder activism. Prior research has shown that an inability of market participants to allocate sufficient intellectual effort to the investment decision can have an impact on market price and volume behavior. We extend this research in an applied setting by considering the effectiveness of the California Public Employees’ Retirement System (CalPERS) focus list, whose aim is to improve the performance and corporate governance of target firms. We find that the share price and volume response to being included in the focus list is a function of the investor attention in a stock, which in turn has an impact on the subsequent managerial response. This suggests that when attention is a scarce cognitive resource, the proactive exploitation of news signals can be an efficient activism strategy.

Details

Review of Behavioural Finance, vol. 2 no. 2
Type: Research Article
ISSN: 1940-5979

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Book part
Publication date: 21 October 2013

Hanne Søndergaard Birkmose and Therese Strand

PurposeInstitutional investors are facing increased pressure and threats of legislation from the European Union to abandon passive ownership…

Abstract

PurposeInstitutional investors are facing increased pressure and threats of legislation from the European Union to abandon passive ownership strategies. This chapter investigates the legal prerequisites for active ownership among institutional investors in two Scandinavian countries to highlight differences in the legal framework that potentially account for apparent dissimilarities in the practice of shareholder activism.

Design/methodology/approach – Data on shareholder proposals from Danish and Swedish annual general meetings from 2006 throughout 2010 suggest that institutional investors are approximately a thousand times more active in Sweden than in Denmark.

Findings – The comparative study of the legal framework for shareholder activism shows diminutive legal distance in general, however, we find that the shareholder-based nomination committee employed in Sweden constitutes an exception. This is relevant, as such a setup transfers power from the board of directors to the owners. Presumably, this reduces the impact of free-rider and collective action problems, and increases the shareholders’ inclination to make proposals, which is also what we find. Moreover, we find other differences in the legal framework that support the transfer of power to the owners.

Research implications – We contribute to literature by investigating the importance of local governance mechanisms created by the legal framework – an area where research is scarce. The chapter discusses how two classical theoretical dilemmas – free-rider problems and collective action problems among shareholders – can be reduced by the implementation of local corporate governance elements.

Originality/value – The chapter outlines the actual practice of shareholder activism, in terms of proposals, in Denmark and Sweden, and highlights divergent legal elements which theoretically transfer power to the shareholders. Thus, regulators should be aware of the impact by local governance mechanisms, and how shareholders react under different legal prerequisites.

Details

Institutional Investors’ Power to Change Corporate Behavior: International Perspectives
Type: Book
ISBN: 978-1-78190-771-9

Keywords

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Article
Publication date: 29 April 2014

Izhak Berkovich

The purpose of this paper is to present the gap between conceptualizations of social injustices and the desired social transformation that addresses multiple social…

Abstract

Purpose

The purpose of this paper is to present the gap between conceptualizations of social injustices and the desired social transformation that addresses multiple social subsystems and levels on one hand, and social justice leadership that addresses intra-school efforts on the other. The paper aims to expand the conceptualization of social justice leadership and tie it together with concepts of activism and social change.

Design/methodology/approach

The paper adopts a socio-ecological perspective. It reviews works about social justice leadership in education, activism, and social change to present the notion that in light of existing social justice barriers educational leaders should serve as activists in schools and in the community and policy areas.

Findings

The paper presents a macro framework, focussing on individual leaders in the field and on the consolidation of intentions, actions, and outcomes in a manner necessary for using social justice as an effective socio-political agenda in a socio-ecological system.

Originality/value

The paper presents a conceptual framework which can enable practitioners and researchers to better understand social justice efforts.

Details

Journal of Educational Administration, vol. 52 no. 3
Type: Research Article
ISSN: 0957-8234

Keywords

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