Problems and Limitations of Institutional Investor Participation in Corporate Governance



Webb R, Beck M & KcKinnon R (2003) Problems and Limitations of Institutional Investor Participation in Corporate Governance. Corporate Governance, 11 (1), pp. 65-73.

During the past decade, major governance breakdowns in public limited companies have brought issues of corporate governance to the forefront of debate. As a result, a series of governance codes have been introduced into the UK that have sought to obligate publicly listed companies to certain practices in their overall operations. One of the codes, the Hampel Code, specifically called for an increased role for institutional investors in governance issues. Using financial system theory as a framework for discussion, this paper questions the viability of institutional investors taking a more active role in monitoring and enforcing governance in the UK. It is argued that, if institutional investors choose to increase participation, then it could create anomalies to the efficient operation of the capital markets, involve institutional investors as delegated monitors, increase costs and create free rider problems.

Corporate governance; Institutional investors; Cadbury; Hampel; Myners; Financial system architecture; Financial market efficiency

Corporate Governance: Volume 11, Issue 1

FundersGlasgow Caledonian University
Publication date01/01/2003
Publication date online04/02/2003

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Professor Robert Webb

Professor Robert Webb

Professor of Banking and Appl. Economics, Accounting & Finance