PRINCIPES D’INTENDANCE

LE MOMENT EST-IL VENU D’ENCADRER LA CONDUITE DES INVESTISSEURS INSTITUTIONNELS DANS LA GOUVERNANCE DES ENTREPRISES?

Abstract

Over the past few decades, institutional investors have largely replaced individual investors in Canadian capital markets, emerging as key players not only in the investment sector but also in corporate governance. In the wake of the financial scandals of the early 2000s, institutional investors began shifting away from their relatively passive approach toward their portfolio companies and started assuming a more prominent role in governance. This increased involvement of institutional investors in governance has raised a range of concerns. Some observers argue that this phenomenon leads to enhanced scrutiny of corporate management, thereby driving up value. Others contend that certain institutional investors exert pressure on management to adopt short-term approaches, to the detriment of creating long-term value. Still others focus on the dynamics between institutional investors and their ultimate beneficiaries, and express concerns over conflicts that may harm the latter’s interests. Against this backdrop, a question arises: should more robust regulatory controls be imposed on the behaviour of institutional investors to govern their conduct, both in their relations with portfolio companies and with their beneficiaries? Such controls could help ensure that investors fulfill their fiduciary responsibilities and act in the best interest of the companies in which they are investing. Globally, stewardship codes have been the preferred method for encouraging responsible investment behaviour, with the United Kingdom pioneering such an approach administered by the Financial Reporting Council—a statutory regulator. In Canada, the Canadian Coalition for Good Governance (CCGG, or “the Coalition”) adopted its stewardship principles in 2005. However, unlike the UK model, these principles represent a form of self-regulation by Coalition members, outside of formal securities regulatory frameworks. This research examines the CCGG’s stewardship principles with a view to determine whether they should be formally incorporated into Canada’s securities regulatory frameworks.