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OECD (2011),The Role of Institutional Investors in Promoting Good Corporate Governance, Corporate Governance, OECD Publishing.http://dx.doi.org/10.1787/9789264128750-en

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Corporate Governance

The Role of Institutional Investors in Promoting Good Corporate GovernanceContents

Executive Summary

Assessment and Recommendations

Part I OverviewChapter 1. The Structure and Behaviour of Institutional Investors

Part II In-depth Country Reviews on the Role of Institutional Investors in Promoting Good Corporate Governance Chapter 2. Australia: The Role of Institutional Investors in Promoting Good Corporate Governance

Chapter 3. Chile: The Role of Institutional Investors in Promoting Good Corporate Governance

Chapter 4. Germany: The Role of Institutional Investors in Promoting Good Corporate Governance

Annex A. The Questionnaire of the OECD Corporate Governance Committee

Annex B. The Data Requested in the Questionnaire of the OECD Corporate Governance Committee

ISBN 978-92-64-12874-326 2011 11 1 P -:HSTCQE=VW]\YX:

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Corporate Governance

The Role of Institutional Investors in Promoting Good Corporate Governance

Corporate Governance

The Role of Institutional Investors in Promoting

Good Corporate Governance

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FOREWORD

Foreword

This report presents the results of the second thematic peer review based on the OECD Principlesof Corporate Governance. The report is focused on the role of institutional investors in promoting

good corporate governance practices including the incentives they face to promote such outcomes. It

covers 26 different jurisdictions, including in-depth reviews of Australia, Chile and Germany.

The report is based in part on a questionnaire that was sent to all participating jurisdictions in

January 2011 (see Annex A). All countries were invited to respond to the first question so as to

provide an overall context within which the review would take place. The three jurisdictions that

were subject to the in-depth review were invited to complete all questions.

The report first reviews what is known about the institutional investor landscape including the

behavioural codes and legal framework. It then describes what is known about the incentives that

condition their actions before considering the record of engagement and voting. The second part

comprises the three country reviews. The report was prepared by Grant Kirkpatrick, Hctor Lehued

and Kenji Hoki with inputs from Simon Wong and Marco Morales and approved for publication

under the authority of the OECD Corporate Governance Committee in August 2011.

The OECD corporate governance peer review process is designed to facilitate effective

implementation of the Principles and to assist market participants and policy makers to respond to

emerging corporate governance risks. The reviews are also forward looking so as to help identify, at

an early stage, key market practices and policy developments that may undermine the quality of

corporate governance. The review process is open to OECD and non-OECD jurisdictions alike.

THE ROLE OF INSTITUTIONAL INVESTORS IN PROMOTING GOOD CORPORATE GOVERNANCE OECD 2011 3

TABLE OF CONTENTS

Table of Contents

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Assessment and Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Part I

Overview

Chapter 1. The Structure and Behaviour of Institutional Investors . . . . . . . . . . . . . . . . 191.1. Background, objectives and issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

1.2. The institutional investor landscape . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

1.3. Codes, legal frameworks and disclosure requirements . . . . . . . . . . . . . . . . . . . 32

1.4. Co-operation between investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

1.5. Investment behaviour of institutional investors: the driving forces . . . . . . . . 40

1.6. The voting and engagement record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Part II

In-depth Country Reviews on the Role of Institutional Investors

in Promoting Good Corporate Governance

Chapter 2. Australia: The Role of Institutional Investors in Promoting Good Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692.1. Institutional investor landscape . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

2.2. Legal rules and other guidance relating to shareholder rights and responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

2.3. Exercise of shareholder rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

2.4. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Annex 2.1: Summary of legal provisions relating to the fiduciary responsibilities of institutional investors in Australia . . . . . . . . . . . . . . . . . . . . . . . . 86

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Chapter 3. Chile: The Role of Institutional Investors in Promoting Good Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 893.1. The corporate governance landscape . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

3.2. Legal and regulatory framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

THE ROLE OF INSTITUTIONAL INVESTORS IN PROMOTING GOOD CORPORATE GOVERNANCE OECD 2011 5

TABLE OF CONTENTS

3.3. Exercise of shareholder rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

3.4. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Chapter 4. Germany: The Role of Institutional Inv