Institutional Determinants of Private Shareholder Engagement in Brazil and South Africa: The Role of Regulation

Abstract

Manuscript type: Empirical Research Question/Issue: This study investigates to what extent regulation encourages private shareholder engagement attitudes and behavior (including behind-the-scenes consultations, letters, meetings, and ongoing dialogues) of pension funds and asset managers with listed investee companies on environmental, social, and corporate governance (ESG) issues in Brazil and South Africa. Research Findings/Insights: Drawing on 44 in-depth semi-structured interviews with pension fund representatives, asset managers, and other investment players, the findings suggest that legislation provides limited direct encouragement to private engagement behavior. However, legislation encourages attitudes toward Responsible Investment by enhancing investor understanding of Responsible Investment, increasing the interest of pension funds and asset consultants in the Responsible Investment practices of asset managers, and reducing the fear of pension funds to violate their fiduciary duties, thereby promoting an enabling environment for ESG engagement. Theoretical/Academic Implications: This article adds to the literature on comparative corporate governance and shareholder engagement. To the best of our knowledge, this is first study that specifically analyzes how regulation affects private shareholder engagement behavior in emerging markets, providing empirical support for the institutional perspective. The findings also suggest that the sophistication of the legislation on ESG issues in Brazil and South Africa is more typical of developed countries, indicating the need for a more fine-grained analysis of emerging markets in corporate governance studies. Practitioner/Policy Implications: This study draws investors' attention to the importance of understanding the national legal environment of the companies with which they engage and offers insights to governments interested in fostering ESG engagement practices.

Private engagement by Nordic institutional investors on environmental, social, and governance risks in global companies

“…This paper will focus on the hidden and direct mechanism of investor activism, namely, private engagements by institutional investors on ESG issues prior to or independent of a shareholder resolution (Barko et al, 2018;Bauer et al, 2014;Dimson et al, 2015;Goodman et al, 2014;Hoepner et al, 2018;Rehbein et al, 2013). Private engagements or dialogues with the target companies are probably widely used, but data restricted to proprietary databases on behindthe-scenes interactions that take place without public knowledge have constrained more broad-scale empirical research (Gifford, 2010;Gillan & Starks, 2003;Goranova, Abouk, Nystrom, & Ehsan, 2017;Logsdon & Buren, 2009;Rehbein et al, 2013;Yamahaki & Frynas, 2016). The broad-scale empirical work at hand that investigates private engagement with respect to ESG issues has been presented by Dimson et al (2015), Bauer et al (2014), Hoepner et al (2018), and Barko et al (2018).…”

“…The Nordic countries feature a stakeholder-oriented governance model (Poulsen, Strand, & Thomsen, 2010;Thomsen & Conyon, 2012), which can shape the collaborative engagement tactic used by institutional investors and the agent who acts according to their preferences (Dyck, Lins, Roth, & Wagner, 2019;Hart & Zingales, 2017;Yamahaki & Frynas, 2016). Liang and Renneboog (2017) report that Nordic companies have the highest ESG ratings in a global perspective to make stakeholder demands on ESG performance high on the agenda in Nordic countries.…”

Governance and Financing of Innovative Very Small Business (VSB): Evidence from a Canadian Biotechnological Firm

“…He also shows the ensuing problems that arise such as organizational problems, governance of VSB and their interactions with a multitude of investment associates (Edmans, 2014;Yamahaki & Frynas, 2016). Starting with the case study of a Canadian biotechnology company, we were able to sketch the outlines of a new type of governance.…”

“…In fact, it seems to us equally important not only to increase the number of empirical studies by systematic and in-depth sectorial studies, but also to include new innovative fi rms with operational confi gurations of inter-fi rm relationships. Based on this analytic and empirical case study it now seems to us possible to progress towards a better formulation of new corporate governance models; specifi cally, for fi rms that seem to emerge today in sectors that are subjected to fast and signifi cant evolutions in their organizations, technology and competitive nature (Yamahaki & Frynas, 2016). Accordingly, new ways to defi ne the evaluation criteria for systems of governance faced with diff erent types of organizations will be required.…”

Inefficiency of pension investment regulation: case of Russia

“…Geographical restrictions are particularly popular in emerging markets. For example, in Brazil, these restrictions have been used to minimize risks (Yamahaki & Frynas, 2016) and, in Taiwan, to cope with recession. It should be noted that geographical restrictions are also used in developed countries, such as the Republic of South Africa (van Heerden, 2013).…”