NETHERLANDS - Institutional investors must increase their involvement as long-term shareholders by exercising their voting rights, according to the corporate governance platform for institutional investors Eumedion. They must also engage with companies.
The lobby group argues in a position paper that institutional investors can reduce investment risk by acting as responsible shareholders.
In order to shape responsible share ownership, institutional investors must increase their expertise in corporate governance and sustainability, and must further integrate these elements into the investment process, Eumedion said.
It suggested investors, such as pension funds, should issue long-term mandates to asset managers requiring managers to increase their focus on responsible share ownership, and claimed asset managers' remuneration should be more clearly linked to their clients' interests.
The body also argued institutional investors should intensify mutual co-operation, in order to gain more clout in corporate management.
Eumedion further advised its members to retrieve loaned shares in case important issues are tabled for shareholders meetings, and to be more open by airing their positions regarding key dialogue.
Any means of compensation - such as an offer of extra dividends or voting rights to shareholders for loyalty - are not effective, it claimed, "as institutional investors can hardly be forced to keep their shares for the long-term."
Eumedion will discuss with its participants in the coming months how its recommendations can be implemented in corporate and investment processes.
It has 67 members with combined assets under management of €1trn.