Institutional Investor Activism

Abstract

For the past quarter century, institutional investors have been frequent activist shareholders on corporate governance issues. A large literature of academic research examines whether this activity is effective in influencing target firms and enhancing the performance of both target firms and activists' portfolios. The importance of this question stems from the role of institutional investors as large and influential investors in the capital markets and as financial fiduciaries who are entrusted with the assets of millions of clients and beneficiaries. This chapter examines the many parallels between the issues that institutions face today in incorporating environmental, social, and governance criteria into their investment and activism programs, and the issues arising 25 years ago in the context of corporate governance. In short, socially responsible activism appears to be at the early stages of gaining momentum and legitimacy among mainstream institutional investors, with a steady stream of academic research likely to follow.

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