Greed, Accountability and Say on Pay
Chapter 9: Limits of institutional shareholders as ‘regulators’ of executive remuneration
Institutional shareholders clearly play the pivotal regulatory role in say on pay, undertaking three diff erent roles within the regulated remuneration cycle. Yet the mixed evidence from the UK and Australia of how pay practices changed following the introduction of say on pay suggests that they are not necessarily successful regulators. This chapter examines two important limits on institutional investors’ regulatory capacities: their preferred model of investment and their ability to act as norm entrepreneurs for executive remuneration practices within investee companies. The assumption that institutional investors want to act as regulators of executive remuneration through rule making, monitoring disclosures, engagement and voting may only be true for certain types of institutional investors and not universally true, despite the rhetoric of ‘responsible investment’ or the notions of ‘stewardship’. The Walker Review of corporate governance in UK financial institutions views stewardship as off ering social legitimacy to significant holders of stock in listed companies, with obligations and attentiveness to the performance of companies over both the short and long term required horizons. Stewardship creates expectations on institutional share owners akin to those in a large family shareholder in a family company. As a concept it extends the moral expectations of the owner beyond those anticipated under the concept of ‘fiduciary capitalism’.
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