Ownership, Activism and Engagement: Institutional Investors as Active Owners

Manuscript TypeConceptual Research Question/IssueWe 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/InsightsWe 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 ImplicationsAlternative 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 toward investment in the firm and its affairs. After modeling 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 ImplicationsOpening 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.