Different visions of stewardship: understanding interactions between large investment managers and activist shareholders

Weak incentives to invest in shareholder oversight and limited resources confine stewardship by large institutional investors. According to an influential argument, activist shareholders can offer a solution by supplying large investment (asset) managers with company-specific information. This article questions the potential informational role of traditional activist campaigns initiated by hedge funds – the most prominent group of activist shareholders – for the purposes of stewardship by large institutional investors by showing that these two groups of shareholders have different visions of stewardship with little scope for interactions. Consistent with this argument, data from the FTSE 350 companies, the UK's largest listed firms, show that associations between activist demands and the voting behaviour of top investment managers vary based on activist types and demand topics. Demands initiated by hedge funds and on business and operating matters receive less support. These findings have important implications for shareholder stewardship and for corporate law reform.