Agents Watching Agents: The Promise of Institutional Investor Voice

84 Pages Posted: 14 May 2008

Date Written: 1992


This article discusses the potential promise and limits of oversight of corporate managers by major institutional investors. I discuss the reasons to believe that, at least for systemic issues that arise at many firms, there can be value is assigning one set of loosely watched agents (institutional money managers) to watch another set (corporate managers). This is partly because, as long as it takes a number of institutions to strongly influence corporate actions, the institutions can also watch each other, thus reducing the risk that any one of them will extract private benefits from the firm. The case for shared institutional voice (with six or ten institutions, often different types of institutions, exercising joint influence) is stronger than the case for direct institutional control of a firm by a particular institution.

In a companion paper, The Value of Institutional Investor Monitoring: The Empirical Evidence, UCLA Law Review, Vol. 39, pp. 895-939 (1992),, I survey the empirical evidence on the value of large shareholder oversight of managers.

Suggested Citation

Black, Bernard S., Agents Watching Agents: The Promise of Institutional Investor Voice (1992). UCLA Law Review, Vol. 39, pp. 811-893, 1992, Available at SSRN:

Bernard S. Black (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
312-503-2784 (Phone)

Northwestern University - Kellogg School of Management

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)

European Corporate Governance Institute (ECGI)


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