Essay on Institutional Investors’ Role in Corporate...

Over the past 60 years, capital markets in the US have grown dramatically. For instance, in 1950, the market value of all stock on the New York Stock Exchange (NYSE) was around $94 billion, and in 2012 the number has increased to more than $14 trillion. (â€Å"Institutional investors: Power and responsibility†, 2013) With this significant increase in the market, it has led to an increasing role for institutional investors. The main issue surrounding institutional investors is whether they should be more or less involved in the companies whose shares they own. When looking at the important roles along with the influence over corporate governance, we can see that institutional investors have an overall positive impact on the company and the†¦show more content†¦Institutional investors can both positively and negatively influence many aspects of a company’s corporate governance by continually monitoring the company operations, exercising their voting power, an d controlling executives pay; all of which will affect whether or not the company is on the right track to success. The market has experienced a drastic growth during the past couple of decades, largely due to institutional investors, and so have the roles and responsibilities that come with it. Institutional investors own such a significant share of individual companies; therefore, they have more incentive to become active in monitoring the company. The trend of a more active role in corporate governance has come about mostly due to the corporate scandals in 2001 and 2002. Institutional investors play such a vital role in corporate governance that they have an organization entitled the Council of Institutional Investors (CII). The CII lays out all of the policies and guidelines that they believe institutional investors should be able to comply with, along with the issues they need to voice their opinion on. In some situations, institutional investors have used their power to influence decisions to replace top management. For example, Fidelity Investments once took control of a corporation by assigning one of its employees as the new CEO in order to turn the company around. In these instances, institutional investors haveShow MoreRelatedCorporate Governance And Role Of Managers1698 Words   |  7 PagesContents INTRODUCTION 1 CORPORATE GOVERNANCE AND ROLE OF MANAGERS 1 STAKEHOLDERS AND THEIR NEEDS 2 LEADERSHIP AND MANAGEMENT PROCESS 3 DIFFERENT CORPORATE GOVERNANCE MODEL AND STRATEGIES 4 CONCLUSION 6 REFERENCES 6 INTRODUCTION This assignment is aiming to identify and critically evaluate the role of institutional investors in gaining better corporate governance. Institutional investors are those organizations, groups of people, families with large pool of money for investment and they systematicallyRead MoreInstitutional Markets : Institutional Investors1505 Words   |  7 PagesInstitutional investors are any organizations or persons which collect quite number sums of money to invest in securities and also control a collection of share amounts to qualify for special treatment and less regulation. 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