Institutional investors are increasingly expected to engage with their investee companies to try to help ensure that the investee companies have an appropriate corporate governance structure and that they operate according to corporate governance best practice. There are a number of ‘tools of governance’ which institutional investors might utilise including constructive dialogue and voting. In this paper, the growth of institutional investors is discussed together with the development of the vote as one of the most powerful means that institutional investors have at their disposal. The cases of two of the UK’s largest and most active institutional investors are discussed to show how the vote is used in practice. The resolutions which tend to be the most contentious are those relating to the appointment/re-election of directors and board composition; remuneration packages and incentive schemes; and strategic issues that may impact on shareholders’ rights/ownership interests. The paper also contains an analysis of the resolutions which occur most frequently together with the average levels of dissent on such issues in various European countries: Austria, Belgium, France, the UK, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden and Switzerland. The barriers to voting that may arise are examined; such barriers include control enhancing mechanisms which are prevalent in many European countries as well as on a wider global basis.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Tax calculation will be finalised during checkout.
Subscribe to journal
Immediate online access to all issues from 2019. Subscription will auto renew annually.
Tax calculation will be finalised during checkout.
AAF 01/06: Assurance reports on internal controls of service organisations made available to third parties; SAS 70: Statement on Auditing Standards No.70: Reports on the processing of transactions by service organizations.
Aviva Investors. (2009). Corporate governance and voting policy 2009. London: Aviva Investors.
Becht, M., Bolton, P. & Roell, A. (2002) Corporate governance and control, ECGI working paper series in finance, Working paper no. 02/2002.
Berle, A. A., & Means, G. C. (1932). The modern corporation and private property. New York: MacMillan.
Cadbury, S. A. (1992). Report of the committee on the financial aspects of corporate governance. London: Gee & Co Ltd.
Combined Code. (2003). The Combined Code on corporate governance. London: Financial Reporting Council.
Combined Code. (2006). The Combined Code on corporate governance. London: Financial Reporting Council.
Combined Code. (2008). The Combined Code on corporate governance. London: Financial Reporting Council.
Davis, S., Lukomnik, J., & Pitt-Watson, D. (2006). The new capitalists, how citizen investors are reshaping the corporate agenda. Boston: Harvard Business School Press.
de Jong, A., Mertens, G. & Roosenboom, P. (2006). Shareholders’ voting at general meetings: Evidence from the Netherlands. Journal of Management and Governance, 10, No. 4.
Ferreira, M. A., & Matos, P. (2008). The colors of investors’ money: The role of institutional investors around the world. Journal of Financial Economics, 88, 3.
Greenbury, S. R. (1995). Directors’ remuneration. London: Gee & Co. Ltd.
Hampel, S. R. (1998). Committee on corporate governance: Preliminary report. London: Gee & Co. Ltd.
Hirschman, A. O. (1970). Exit, voice, and loyalty. Cambridge, Massachusetts: Harvard University Press.
ICGN. (2007). Statement of principles on institutional shareholder responsibilities. London: International Corporate Governance Network.
ICGN. (2009). ICGN global corporate governance principles: Revised 2009. London: International Corporate Governance Network.
ISC. (2002). The responsibilities of institutional shareholders and agents—statement of principles. London: Institutional Shareholders’ Committee.
ISC. (2005). Review of the Institutional Shareholders’ Committee statement on the responsibilities of institutional shareholders and agents. London: Institutional Shareholders’ Committee.
ISC. (2007a). The responsibilities of institutional shareholders and agents—statement of principles. London: Institutional Shareholders’ Committee.
ISC. (2007b). Institutional Shareholders’ Committee framework on voting disclosure. London: Institutional Shareholders’ Committee.
ISC. (2009). Code on the responsibilities of institutional investors. London: Institutional Shareholders’ Committee.
Mallin, C. A. (1994). Voting: The role of institutional investors in corporate governance, ICAEW Research Board Monograph, ICAEW, London.
Mallin, C. A. (2008). Institutional shareholders: Their role in the shaping of corporate governance. International Journal of Corporate Governance, 1(1), 97–105.
Mallin, C. A. (2009). Corporate governance (3rd ed.). Oxford: Oxford University Press.
Mallin, C. A. (2010). Institutional and other shareholders. In R. Anderson & K. Baker (Eds.), Corporate governance: A synthesis of theory, research, and practice. New York: Wiley (Part of the Robert Kolb Finance Series, forthcoming 2010).
Manifest. (2009). The Manifest European proxy voting review 2009. London: Manifest Information Services Limited.
Monks, R., & Sykes, A. (2002). Capitalism without owners will fail: A policymaker’s guide to reform. London: Centre for the Study of Financial Innovation.
Myners, P. (2007). Review of the impediments to voting UK shares—report by Paul Myners to the shareholder voting working group—an update on progress three years on. London: Investment Management Association.
National Association of Pension Funds. (2009). Corporate governance policy and voting guidelines. London: National Association of Pension Funds.
Office of National Statistics. (2010). Share ownership, a report on ownership of shares as at 31 December 2008. Norwich: HMSO.
Organisation for Overseas Co-operation and Development. (2004). Principles of corporate governance. Paris: OECD.
Selvaggi, M. & Upton, J. (2008). Governance and performance in corporate Britain, ABI research paper 7. Report from the ABI Research and Investment Affairs Departments, London.
Useem, M. (1996). Investor capitalism—how money managers are changing the face of corporate America. New York: BasicBooks, Harper Collins Publishers Inc.
This paper was first presented at the International Conference on Shareholder Rights, Shareholder Voting and Corporate Performance held at the University of Cagliari in March 2008. The author thanks participants for their helpful comments.
About this article
Cite this article
Mallin, C. Institutional investors: the vote as a tool of governance. J Manag Gov 16, 177–196 (2012). https://doi.org/10.1007/s10997-010-9137-2
- Corporate governance
- Institutional investors
- Control enhancing mechanisms
- ‘Say on pay’