Owners or traders? Conceptualizations of institutional investors and their relationship with corporate managers

Abstract

We draw on a series of in-depth interviews with senior managers from institutional investors and large listed corporations to explore how different conceptualizations of institutional investors, their role in the corporate governance process, and their interactions with corporate management, are reflected in the accounts of the actors concerned. We find that the conceptualizations in terms of ownership and agency that dominate both academic and popular discourses are marginal to the actors’ accounts. Rather, both fund managers and company managers conceptualize institutional investors primarily as financial traders who happen,as a result of their trading, to control key resources, but whose interests are effectively divorced from those of long-term share owners. Our analysis suggests that far from being mitigated by the large share blocks of institutional investors, as some commentators have suggested, the separation of ownership from control has been compounded in the UK by a separation of accountability from responsibility, with the interests of the institutions holding managers accountable being quite different from those of the owner-beneficiaries to whom they feel responsible. This raises significant challenges for corporate governance policy as well as new issues for research into the governance process.