Bang for the Buck : Achieving effective shareholder engagement through dialogues

Sammanfattning: The consolidation of corporate ownership into the hands of large institutional investors has resulted in growing expectations that actors in the financial system should leverage their positions of ownership to improve corporate sustainability. In other words, institutional investors are expected to take a greater responsibility for the transition towards a greener economy by becoming active owners. However, active ownership is not a uniform concept. Instead, the term can imply many different strategies and tools, raising questions of how investors become active owners in a way that yields maximum influence while economizing their resources. Among all the tools investors have available, shareholder engagement through dialogues is suggested to have many advantages. However, previous research has not provided a clear-cut account of the mechanisms by which shareholder engagement through dialogues unfold successfully. Therefore, this thesis aims to contribute to the understanding of when and how engagement dialogue becomes a powerful tool for shareholders in order to improve corporate sustainability. The study is performed in the context of actively managed equity funds, with interviews from both funds and companies. In order to understand how actively managed equity funds can effectively leverage their ownership through engagement dialogues, the focus of this study has been twofold. First, the research has focused on understanding how the internal structures within funds should be designed to support the engagement process. Second, the research has focused on pinpointing the mechanisms that make engagement dialogue between Swedish equity funds and their portfolio companies successful. This has resulted in the development of three frameworks, aiming to facilitate funds to make conscious decisions regarding how they work with shareholder dialogues.