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

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@article{f63447fc4b1440c0bcd20a21ffd0f26c,
title = "Compensation-related institutional investor activism.: A literature review and integrated analysis of sustainability aspects",
abstract = "PurposeThis paper aims to analyse 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/approachBased on the principal-agent theory, the authors conduct a structured literature review and evaluate 40 empirical-quantitative studies on that topic.FindingsThe traditional assumption of homogeneity within institutional investors, which is in line with the principal–agent theory, has to 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 by higher SOP dissents and prevent excessive management compensation.Research limitations/implicationsA 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 in more detail the impact of institutional investor types on proxy voting, SOP and (sustainable) management compensation.Practical implicationsWith regard to the increased shareholder activism and regulations on SOP and management compensation since the 2007/2008 financial crisis, firms should be aware of the monitoring role of institutional investors and should analyse their specific ownership nature (time- and content-driven and as well as range of activity).Originality/valueTo the best of authors’ knowledge, 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 research studies.",
keywords = "Management studies, Say on pay, shareholder proposal, Shareholder activism, Management compensation, Principal-agent theory, institutional ownership, Sustainability Science",
author = "Patrick Velte and J{\"o}rn Obermann",
year = "2020",
month = "9",
day = "18",
doi = "10.1108/JGR-10-2019-0096",
language = "English",
journal = "Journal of Global Responsibility",
issn = "2041-2568",
publisher = "Emerald Publishing Limited",

}

RIS

TY - JOUR

T1 - Compensation-related institutional investor activism.

T2 - Journal of Global Responsibility

AU - Velte,Patrick

AU - Obermann,Jörn

PY - 2020/9/18

Y1 - 2020/9/18

N2 - PurposeThis paper aims to analyse 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/approachBased on the principal-agent theory, the authors conduct a structured literature review and evaluate 40 empirical-quantitative studies on that topic.FindingsThe traditional assumption of homogeneity within institutional investors, which is in line with the principal–agent theory, has to 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 by higher SOP dissents and prevent excessive management compensation.Research limitations/implicationsA 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 in more detail the impact of institutional investor types on proxy voting, SOP and (sustainable) management compensation.Practical implicationsWith regard to the increased shareholder activism and regulations on SOP and management compensation since the 2007/2008 financial crisis, firms should be aware of the monitoring role of institutional investors and should analyse their specific ownership nature (time- and content-driven and as well as range of activity).Originality/valueTo the best of authors’ knowledge, 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 research studies.

AB - PurposeThis paper aims to analyse 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/approachBased on the principal-agent theory, the authors conduct a structured literature review and evaluate 40 empirical-quantitative studies on that topic.FindingsThe traditional assumption of homogeneity within institutional investors, which is in line with the principal–agent theory, has to 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 by higher SOP dissents and prevent excessive management compensation.Research limitations/implicationsA 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 in more detail the impact of institutional investor types on proxy voting, SOP and (sustainable) management compensation.Practical implicationsWith regard to the increased shareholder activism and regulations on SOP and management compensation since the 2007/2008 financial crisis, firms should be aware of the monitoring role of institutional investors and should analyse their specific ownership nature (time- and content-driven and as well as range of activity).Originality/valueTo the best of authors’ knowledge, 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 research studies.

KW - Management studies

KW - Say on pay

KW - shareholder proposal

KW - Shareholder activism

KW - Management compensation

KW - Principal-agent theory

KW - institutional ownership

KW - Sustainability Science

U2 - 10.1108/JGR-10-2019-0096

DO - 10.1108/JGR-10-2019-0096

M3 - Journal articles

JO - Journal of Global Responsibility

JF - Journal of Global Responsibility

SN - 2041-2568

ER -

DOI

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