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Chapter 6: The Role of Institutional Investors in Corporate Governance

Complete the fill-in-the-blank questions below to test your knowledge of the material in chapter 6 of the textbook.

1
Chapter 6 - Question 1

Insurance companies and pension funds can exercise a significant influence on the corporate governance of the companies in which they invest. Investors such as these are termed investors.

Insurance companies and pension funds can exercise a significant influence on the corporate governance of the companies in which they invest. Investors such as these are termed institutional investors.

They are very powerful as they own large amounts of equity in UK (and other) companies.

Page reference: 77

Insurance companies and pension funds can exercise a significant influence on the corporate governance of the companies in which they invest. Investors such as these are termed institutional investors.

They are very powerful as they own large amounts of equity in UK (and other) companies.

Page reference: 77

Check your answer

2
Chapter 6 - Question 2

Institutional investors are encouraged to have an ongoing relationship with the companies in which they invest. In this regard, an important tool of corporate governance is .

Institutional investors are encouraged to have an ongoing relationship with the companies in which they invest. In this regard, an important tool of corporate governance is dialogue.

This dialogue is seen as an important element of a constructive relationship between investors and companies and should be based on a mutual understanding of objectives.

Page reference: 79/82

Institutional investors are encouraged to have an ongoing relationship with the companies in which they invest. In this regard, an important tool of corporate governance is dialogue.

This dialogue is seen as an important element of a constructive relationship between investors and companies and should be based on a mutual understanding of objectives.

Page reference: 79/82

Check your answer

3
Chapter 6 - Question 3

Given the large shareholdings of institutional investors, it is considered important that they their shares in a considered and positive way and disclose their policies in this area.

Given the large shareholdings of institutional investors, it is considered important that they vote their shares in a considered and positive way and disclose their policies in this area.

Most institutional investors try to vote their shares at annual general meetings (and other meetings as they arise) and they disclose their voting polices on key issues. Some institutional investors also publish their voting statistics and other voting-related disclosures on their websites.

Page reference: 83-87

Given the large shareholdings of institutional investors, it is considered important that they vote their shares in a considered and positive way and disclose their policies in this area.

Most institutional investors try to vote their shares at annual general meetings (and other meetings as they arise) and they disclose their voting polices on key issues. Some institutional investors also publish their voting statistics and other voting-related disclosures on their websites.

Page reference: 83-87

Check your answer

4
Chapter 6 - Question 4

Institutional investors may seek to have a positive all-round relationship with the companies in which they invest and seek to with them.

Institutional investors may seek to have a positive all-round relationship with the companies in which they invest and seek to engage with them.

Engagement can help ensure constructive dialogue between the institutional investors and the company's board of directors.

Page reference: 82

Institutional investors may seek to have a positive all-round relationship with the companies in which they invest and seek to engage with them.

Engagement can help ensure constructive dialogue between the institutional investors and the company's board of directors.

Page reference: 82

Check your answer

5
Chapter 6 - Question 5

A list is a list of underperforming companies which may be targeted by institutional investors who are proactive in trying to improve the situation at the company.

A focus list is a list of underperforming companies which may be targeted by institutional investors who are proactive in trying to improve the situation at the company.

The companies would usually be underperforming a main index (such as Standard & Poor's, or the FTSE100) and the institutional investors would hope to release hidden value by intervening in the companies and for, example, changing certain aspects of the corporate governance, such as replacing some of the directors.

Page reference: 87

A focus list is a list of underperforming companies which may be targeted by institutional investors who are proactive in trying to improve the situation at the company.

The companies would usually be underperforming a main index (such as Standard & Poor's, or the FTSE100) and the institutional investors would hope to release hidden value by intervening in the companies and for, example, changing certain aspects of the corporate governance, such as replacing some of the directors.

Page reference: 87

Check your answer