In addition, institutional investors actively participate in capital market activities and corporate governance, which is conducive to improving the overall quality of listed companies. The main purpose of institutional investors entering the market is to obtain long-term and stable return on investment. In order to make listed companies achieve sustainable and good performance, institutional investors are actively exploring ways to participate in corporate decision-making, improve corporate governance structure, improve the overall quality of the company and enhance its value.
1. Ways for institutional investors to participate in corporate governance
1. Passive and indirect participation through the strategy of "voting with feet"
When the corresponding legal system is imperfect or the cost of directly participating in the governance of listed companies is high, institutional investors tend to adopt the strategy of "voting with their feet", that is, there is a positive correlation between the shareholding ratio of institutional investors and the performance of listed companies. Although in this case, institutional investors do not directly affect the company's decision-making, because of its professionalism, "voting with their feet" can release the judgment signal of institutional investors on the company's profitability, thus affecting the investment direction of the company's shareholders or other investors, having a certain impact on the company's financing and bringing certain pressure to the management's corporate governance decision-making.
"Voting with your feet" does not directly participate in corporate governance, and its role in continuously improving the overall quality of listed companies is limited. In addition, "voting with feet" may change investors' expectations of the company's development, which may easily lead to large fluctuations in stock prices, impact the stock market and affect market stability.
2. Actively participate in corporate governance and decision-making.
At the beginning of the 20th century, American insurance companies, mutual funds and banks began to take active measures to directly participate in the governance of listed companies. However, due to the restrictions of national policies, this phenomenon of direct participation is rare. Since 1990s, the American government has relaxed the corresponding policies. For example, the labor department encourages pension funds to actively participate in the supervision of listed companies and communicate with the management of enterprises in order to maintain and increase the value of funds held. In recent years, the institutional investment environment in the United States has been improved, and more and more American institutional investors tend to directly intervene in the governance of listed companies, and the status of institutional investors has gradually improved.
Compared with individual investors, institutional investors generally hold more shares, are more professional, have more means to obtain effective information and have more motivation and ability to intervene in the governance of listed companies. Institutional investors can directly participate in the company's decision-making process through direct communication with management, election of directors and supervisors, participation in shareholders' meetings and submission of shareholders' proposals.
First of all, private consultation with management is a common way for institutional investors to participate in corporate governance. Before private consultation between institutional investors and listed companies, institutional investors will use their right to propose and replace managers with power of attorney. If the two sides reach a certain understanding in the process of private consultation, then the institution can give up the original entrustment link. Because this method is relatively private, it can effectively communicate the demands of both parties, and the reasonable suggestions of institutional investors are more easily adopted by management, which is helpful to reduce agency costs and improve company value.
Second, with the increase of the shareholding ratio of institutional investors, it has become a new trend to appoint directors, supervisors or senior managers in listed companies. The election of company directors is beneficial for institutional investors to supervise and manage listed companies more effectively, urge listed companies to disclose true and comprehensive information in time, strengthen social supervision of enterprises, and reduce information asymmetry between company management and external investors.
Third, attending the shareholders' meeting is an important manifestation of institutional investors' active participation in corporate governance, which is conducive to protecting the rights and interests of minority shareholders. However, it should be noted that institutional investors have different voting rights for different types of investments. For financial products that enter the balance sheet of institutional investors, institutional investors should enjoy full voting rights; For priority and inferior funds that require fixed income in a short period of time, such as bank financial planning, the attributes of debt funds or preferred stocks are clarified and voting rights are not given; All kinds of asset management plans and private investment funds should be clearly defined as trust relationships, and exercise voting rights on behalf of clients in accordance with the principles of "personal management" and "not seeking control".
Fourthly, submitting shareholders' proposals is one of the most active ways for institutional investors to participate in corporate governance. Gillan and starks pointed out that in the mid-1980s, American public pension funds and trade union funds began to submit shareholder proposals to companies individually or jointly. As institutional investors are in contact with a large number of companies, they are more experienced in some governance issues. Submitting shareholders' proposals will help companies analyze governance issues from a new perspective, make scientific decisions and improve the value of listed companies.
Finally, if the company's management has bad behavior, which seriously damages the company's interests, institutional investors can conduct shareholder litigation, which is a more extreme way. Litigation is an effective legal way for institutional investors, and it can also effectively safeguard their own rights and interests. Generally, it can be divided into two forms: direct shareholder litigation and shareholder representative litigation. Direct litigation of shareholders is a lawsuit that shareholders conduct in their own name in order to protect their own interests, including litigation for the right to know, litigation for damages, litigation for dissolution of the company, etc. In the process of litigation, there are many expenses and time. Compared with individual investors' class action, institutional investors can get more compensation when they file a lawsuit as plaintiffs, and the improvement of corporate governance afterwards is relatively high; The purpose of shareholder representative litigation is to investigate the legal responsibility of the responsible person on behalf of all shareholders of the company for the benefit of all shareholders.
Judging from the situation in the United States, institutional investors' direct participation in corporate governance also has certain disadvantages. Institutional investors may have business relations with listed companies, and due to potential conflicts of interest, institutional investors may be forced to support proposals that are contrary to the interests of their trustees and cannot properly supervise the governance of listed companies. Therefore, while encouraging institutional investors to actively enter the market, complete disclosure of conflicts of interest should be made to ensure that institutional investors make objective and fair judgments.