Voting Engagement by Large Institutional Investors

While shareholder stewardship 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 oversight. 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. Although the shareholder opposition rate to management proposals, many of which are trivial, remains economically minor, the relative change over time is significant. The study also reveals that the primary target of investor oversight by large fund managers has been corporate governance standards and global challenges shared across many companies and countries, rather than business strategy or performance. These findings have important implications and will better inform discussions and efforts to build regulatory frameworks for effective shareholder stewardship and engagement in publicly traded companies. The results suggest that regulators need to remain realistic by not placing impractical stewardship 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.