Can institutional investors generate sufficient power through collective action to drive improvements in governance? We use proprietary data on the private communications of a formal coalition of Canadian institutional investors and find that its private engagements influenced firms’ adoption of majority voting and say-on-pay advisory votes, improved compensation structure and disclosure, and influenced CEO incentive intensity. Spillovers to non-engaged firms occur through board interlocks and to firms in which the CCGG is expected to be more powerful in a voting contest. This form of activism is both a substitute and complement to other interventions to address governance concerns.
Alexander Dyck is a Professor of Finance and Business Economics at Rotman and ICPM Professor in Pension Management. He teaches PhD and MBA courses in Corporate Finance, Mergers and Acquisitions and Private Equity. In 2009-2010, he was a visiting scholar in Finance at INSEAD. Previously, he was Associate Professor at Harvard Business School where he taught in the MBA, doctoral and executive education programs. His primary research interest examines the problem of corporate governance with a focus on the institutions that bear on it and the implications for management.