Different Visions of Stewardship: Understanding Interactions between Large Investment Managers and Activist Shareholders

76 Pages Posted: 17 Feb 2021 Last revised: 10 Mar 2021

See all articles by Suren Gomtsian

Suren Gomtsian

University of Leeds School of Law; Tilburg Law and Economics Center (TILEC)

Date Written: February 15, 2021


The rise of a small group of investment (asset) managers with an enormous potential to influence corporate decision-making has reinforced attention to shareholder stewardship as one of the pillars of corporate governance. But weak incentives to invest in shareholder oversight and limited resources confine voting and engagement by large investment managers. According to an influential argument, activist shareholders can offer a solution by supplying large investment managers with company-specific information. This paper advances a thesis that stewardship efforts of large investment managers are unlikely to be informed by activist campaigns and offers empirical evidence and illustrative case studies supporting this claim. The paper argues that large investment managers and hedge fund activists – the most prominent group of activist shareholders – have different visions of stewardship with little scope for interactions. For large investment managers, general corporate governance and sustainability themes have priority over the traditional topics of activist demands targeting business and operating matters. Consistent with the different visions of stewardship, data from the FTSE 350 companies show that associations between activist demands and the voting behavior of the top investment managers vary based on activist types and demand topics. Activist demands initiated by hedge funds and on business and operating matters receive less support. Importantly, differences between fund groups with predominantly active or passive indexing strategies in the likelihood of opposing corporate managers in activist targeted firms are minimal. These findings offer better understanding of institutional investor stewardship and have important practical implications for building regulatory frameworks for effective stewardship.

Keywords: Shareholder activism, Shareholder stewardship, Corporate governance, Voting, Hedge funds, Institutional investors, Ownership structure

JEL Classification: G23, G32, G34, K22

Suggested Citation

Gomtsian, Suren, Different Visions of Stewardship: Understanding Interactions between Large Investment Managers and Activist Shareholders (February 15, 2021). TILEC Discussion Paper No. DP 2021-002, Available at SSRN: https://ssrn.com/abstract=3787348 or http://dx.doi.org/10.2139/ssrn.3787348

Suren Gomtsian (Contact Author)

University of Leeds School of Law ( email )

Leeds, LS2 9JT
United Kingdom

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE

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