Corporate Governance – What institutional investors expect nowadays

Tim Albrecht, DWS
Mahesh Jayakumar, State Street Global Advisors
Prof. Dr. Katja Langenbucher, Goethe-Universität Frankfurt

Institutional investors are the largest investor group in Germany as well as around the world. Investor Relations departments are therefore in continuous contact with a large number of current and potential institutional investors – and also Financial Communication has dedicated considerable attention to this group. But what are the expectations of these shareholders in the capital market communication of companies - especially with regards to Corporate Governance?

Tim Albrecht (DWS) and Mahesh Jayakumar (State Street Global Advisors), two representatives of major institutional investors, talked about how investment decisions are made within their teams and what internal and external information is used. In addition, Prof. Dr. Katja Langenbucher (Goethe-University Frankfurt) gave an insight into the legal framework in which investors 'transparency requirements are met with companies' obligation to provide information.

One of the key issues was the growing importance of passive versus actively managed funds. Although it was assumed that companies would have little opportunity to interact, it was revealed how intensively passive funds deal with the portfolio companies. Under the term "asset stewardship" initiatives by the investors were discussed, as well as approaches for the capital market communication of companies.

The focus of the discussion was on the importance of ESG factors (environmental, social & good governance); especially how these are included in the investment process. According to unanimous opinion, "G", i.e. good governance, is the most important factor. Positive values ​​for "S" and "E" would often result from this. The scope of governance aspects discussed ranged from the independence, experience and also the "refreshment" of the executive board to the use of preference and ordinary shares. With regard to the ESG factors, companies are confronted with a variety of different transparency expectations, so the comments on initial initiatives to standardize these factors were welcomed by the panel.