Compensation-related institutional investor activism.: A literature review and integrated analysis of sustainability aspects

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Purpose – This paper analyses whether and how different types of institutional investors influence shareholder proposal initiations, say on pay (SOP) votes and management compensation from a sustainability perspective.
Design/methodology/approach – Based on principal agent theory, the authors conduct a structured literature review and evaluate 40 empirical quantitative studies on that topic.
Findings – The traditional assumption of homogeneity within institutional investors, which is in line with principal agent theory, must be questioned. Only special types of investors (e.g. with long-term and non-financial orientations, and active institutions) run an intensive monitoring strategy, and thus initiate shareholder proposals, discipline managers with higher SOP dissents and prevent excessive management compensation.
Research limitations/applications – A detailed analysis of institutional investor types is needed in future empirical analyses. In view of the current debate on climate change policy, future research could analyse the impact of institutional investor types on proxy voting, SOP and (sustainable) management compensation in more detail.
Practical implications – With regard to the increased shareholder activism and regulations on SOP and management compensation since the 2007/08 financial crisis, firms should be aware of the monitoring role of institutional investors and analyse their specific ownership nature (time- and content-driven as well as range of activity).
Originality/value – This is the first literature review with a clear focus on institutional investor range and nature, shareholder proposal initiation, SOP and management compensation (reporting) from a sustainability viewpoint. The authors explain the main variables that have been included in research, stress the limitations of this work and offer useful recommendations for future studies.
OriginalspracheEnglisch
ZeitschriftJournal of Global Responsibility
ISSN2041-2568
PublikationsstatusAngenommen/Im Druck - 2020
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