Institutional investors looking more
closely into companies, boards – Morrow Sodali
11, 2019 12:01 AM · UPDATED 11:46 AM
Asset owners and
managers continue to "dig deeper" into how their portfolio companies
are dealing with issues such as ESG, executive pay and activism, and
away from compliance checklists, according to Morrow Sodali's
Investor Survey released Monday.
are increasingly interested in looking at companies on the merits
rather than just doing a compliance exercise," said John Wilcox,
chairman of Morrow Sodali, a global corporate governance firm, in an
annual survey asked investors with a collective $33 trillion in assets
which issues matter most about the companies they hold. The 46
respondents represent senior governance specialists in their
organizations, with $19.5 trillion in active investments and $13.5
trillion in passive ones. The survey was a combination of an online
survey and one-on-one meetings.
Asked to rank
the factors that influence their voting decisions, 93% selected
governance policies and practices, followed by long-term business
strategy and effective communications. On environmental, social and
governance factors, the survey found it is "increasingly being blended
into the discussion about what companies are supposed to be doing and
how they are judged," Mr. Wilcox said.
engagement, 87% of respondents indicated that "proactive and regular
engagement" with the board of directors helps them evaluate a
company's culture, purpose and reputational risk. That can be good
news for the companies because "some investors are willing to give
companies greater flexibility to explain policies in terms of their
specific business conditions and strategic goals," Morrow Sodali
found, even though a deeper dive into companies' strategic decisions
increases demands on directors' time and requires greater
In 2019, the
investors said they will increase their focus on board composition and
accountability, and press for more disclosure and dialogue around a
company's climate-change strategy.
also will shift from an investor-specific activity and instead come up
more through collective engagement efforts in 2019, the survey found,
with 67% of investors ranking compensation as the most important issue
in their engagement with other investors.
activist campaigns, the institutional investors said they are most
likely to support one when there is a focus on long-term strategy.
current U.S. political climate toward deregulation, "people are
looking to companies now to fill in the gap," Mr. Wilcox said.
Crain Communications Inc.