Ownership, Activism and Engagement : Institutional Investors as Active Owners

Research Question: We research two questions: First, why do some institutional investors operate at a distance from organizations seemingly acting only to “exit” and “trade” shares while others actively engage through various means of “voice”? Second, what processes and behaviour are associated with active ownership? Research Findings/Insights: We develop the concept of active ownership by drawing on contrasting theories and images of ownership, identifying antecedents of active ownership and distinguishing between alternative processes of active ownership. Theoretical/Academic Implications: Alternative pathways to active ownership contrast the distant, sometimes adversarial nature of shareholder activism with an engaged, collaborative relationship between investors and corporations. Few studies examine active ownership as a process of engagement and mutual exchange between parties taking a generally longer-term perspective towards investment in the firm and its affairs. After modelling active ownership, we develop a research agenda of substantive issues ranging from market and institutional conditions, through investment organization and practice, to board and investor relations. Practitioner/Policy Implications: Opening up the multidimensionality of engagement and relations between investors and corporations is crucial to promoting good corporate governance. Policymakers and practitioners require such knowledge when anticipating and developing adjustments to institutions of corporate governance