Brief Remarks on Corporate Sustainability and Shareholder Activism

Institutional investors activism is one of the hottest corporate and securities law issue. Particularly, it is well worth asking whether institutional investors can pursue a sustainable corporate governance and how EU securities regulation can foster this role. Today most retail investors hold shares through institutional shareholders, which have therefore the power to request publicly hold corporations to pay attention to sustainability. However, they do so on behalf of their beneficiaries, because they are ultimately bearing the financial results of the corporate management. The key issue is whether the corporate governance behavior of institutional investors reflect the preferences of their beneficiaries, i.e. an agency cost problem. Moreover, institutional investors include a multi-faceted variety of financial intermediaries having different relationship with their beneficiaries. There are actively managed funds and funds passively tracking a market index, which have therefore different incentives to pursue sustainable corporate governance. On these premises the essay aims to provide a synthetic but comprehensive view of how different investment strategies and behaviors of institutional investors can ameliorate the quality of corporate decisions. For this purpose, it is crucial to investigate the role of self-regulation and that of EU securities regulation in coping with the principal-agent relationship’s problem and curbing greenwashing.