The Rhetoric of Activist Shareholder Stewards

The corporate governance role of institutional investors has long been stressed and culminated in recent emphasis on shareholder stewardship, the new buzzword in corporate circles. Today, it is becoming widely accepted that institutional shareholders not only have rights that can be used actively to monitor and engage with investee companies to improve corporate governance and performance but also responsibilities to their clients, their beneficiaries, their investee companies and society to meet sustainability goals. This Article advances the thesis that the model of shareholder stewardship as originally aspired and expected by the first generation UK Stewardship Code (2010/12) is mainly about firm-specific, micro-level stewardship, rather than the market-level-style of stewardship associated with large passive asset managers, such as index funds, or the indirect-style of stewardship mostly exercised by asset owners. The main argument advanced in this Article is that while the ideal, firm-specific shareholder steward was never there in the first place, and already is largely vanishing, a special breed of activist investors with long-term horizons and dedicated, firm-specific monitoring capacities have the abilities and incentives to undertake the model of shareholder stewardship aspired by the first generation UK Stewardship Code. The question then arises as the extent to which these so called “activist shareholder stewards” can play the role of “stewardship arbitrageurs” or “stewardship intermediaries” and advance an “enlightened” form of firm-specific shareholder stewardship and accountability to serve “shared value”. To empirically address this question, this Article applies natural language processing (NLP) to explore the rhetoric of activist signatories to the first generation UK Stewardship Code, as revealed by their disclosure statements. The results show that there is a differentiated understanding of shareholder stewardship among the activist signatories to the UK Stewardship Code, but there is a small but potentially important breed of “enlightened” activist stewards that are ready to take on—and succeed at—micro-level shareholder stewardship. The findings have important implications for institutional investors and policymakers alike.