UK - Company performance has a direct correlation with shareholder activism, a new report concludes.
Hermes Investment Management says “worldwide research” into the link between governance and performance shows a relationship between active ownership of shares and the improved performance of companies.
Hermes corporate governance director Colin Melvin said: “This suggests that the corporate governance structure itself is less important than the extent to which ownership oversight is exercised.
“It is not the absolute ‘quality’ of governance that is important in terms of compliance with codes, but rather the process of active ownership and oversight management.”
Melvin pointed out that Hermes corporate governance activities were based on the premise that companies with “active, interested and involved” shareholders tended to outperform.
In its report, Melvin criticised performance studies that considered only one feature in isolation, such as board governance. “What is missing is an analysis of the effect on companies’ value of the actions taken by investors to improve the quality of their governance,” he said.
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