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priest does not have a mercy"), and do give the preference to external candidates that they are informed the only positive properties about. Because of it, the directors are used to make a mistake and they do take into the management team a stranger, a person that may be really good but will have some problems during the adaptation process with the team.
As the next step, the specialists do advise us to distribute the tasks between these selected leaders. It is much more effective to distribute the responsibilities within the management group concerning the strategically important tasks, and then the respective persons will be required to work towards their arrangement on a daily basis. Each leader must be given an authorization to take all the needed decisions or to require the fulfilment of his/her tasks from any member of the organization. Also, it is reasonable not to collect the inter-conflicting tasks in front of the same leader, in order to let him/her to resolve them. Such tasks have to be dis-
tributed among the different members of management team, as in such a case the quality of a parallel control is much higher. After the distribution of competence domains, the services existing inside the company must be also distributed among the leaders. Each leader has to receive under own subordination the service that is the most necessary one in order to resolve effectively the problems under his/her responsibility. On this stage it is very important to realize that the distribution of services does not mean the making these services unavailable to other leaders and to their domains of curatorship. Here the discourse is going about the point that such services are cured by a leader that does need them most of all.
So, in the company as well as in the government of a country, a structure of management must correspond to its leader resources. If it will pass in such a way, than even finding the solutions for the most complicate ideas, decisions or problems will become a quite feasible thing.
References:
1. Kotter D. Interview. - URL: http://www.e-xecutive.ru/ca-reer/adviser/553538/index. php?ID=553538
2. Маслов И. И. Менеджмент лидеров, ж. "Финансовый бизнес", - № 1, - 2010.
3. Смит Э. Табу лидерства. О чем молчат капитаны бизнеса, - М., - Вершина, - 2007.
4. Adizes J. Leadingthe Leaders. URL: http://www.executive.ru/knowledge/morldtolist/345274/index. php?ID=345274
Rezart Dibra, PhD Professional Academy of Business Tirana, Albania E-mail: [email protected]
Corporate governance and institutional investors
Abstract: Institutional investors operate on the basis of well-defined risk-return criteria. Ownership concentrated among identifiable groups of insiders (e. g. family interests, allied industrial concerns, banks & holding companies) [l].Ownership dispersed among large number of institutional and retail investors. Corporate governance has become one of the most commonly used phrases in the current global business vocabulary. The importance of corporate governance for corporate success as well as for social welfare cannot be overstated. Examples of massive corporate collapses resulting from weak systems of corporate governance have highlighted the need to improve and reform corporate governance at an international level. This paper examines the role of institutional investors in corporate governance and whether regulation is likely to encourage them to become active stewards.
Keywords: Institutional Investors, corporate governance (CG), investors and investment, corporate social responsibility (CSR) etc.
1. Introduction gage with companies and hold the management to ac-
Shareholders — the corporate governance frame- count for its performance. Institutional investors are work is built on the assumption that shareholders en- financial institutions that accept funds from third parties
Section 4. Management
for investment in their own name but on such parties' behalf. They include pension funds, mutual funds and insurance companies. By 2009, they managed an estimated USD 53 trillion of assets in the OECD area, including USD 22 trillion in equity. Additionally, there are large investments made by the fund management industry directly under their client's name. This makes institutional investors a major force in many capital markets. With the goal of optimizing returns for targeted levels of risk, as well as for prudential regulation, institutional investors diversify investments into large portfolios, many of them having investments in thousands of companies. Some managers pursue active investment strategies, but increasingly, they passively manage against a benchmark, resorting to indexing. At the same time, the investment chain has lengthened by outsourcing of management, further distancing investee companies from the beneficial owners. As a result, incentives do not always stimulate institutional investors to engage in monitoring the corporate governance practices of investee companies. Types of institutional arrangements for fund managers: 1. fund management or trust departments of banks; 2. separately capitalized fund management firms, which may be affiliates of banks, securities firms, or insurance companies; 3. wholly independent fund management companies; or 4. in-house management departments of large insurance companies and pension funds [2]. From a governance/monitoring point of view, institutional investing often involves principals (e. g. investors or beneficiaries) hiring a first tier set of agents (e. g. fund managers) to watch a second-tier set of agents (corporate managers). The difficulty with this arrangement is that the first-tier set of agents are themselves entities subject to potential conflicts of interest, who need to be watched and given appropriate incentives. Governance systems and their interrelationships with CSR (corporate social responsibility) are demonstrated as fluid according to the national and institutional context, economic situation and industry impact. In the eyes of practitioners corporate governance includes both structural and behavioral factors as well as responsibilities and actions towards shareholders and stakeholders. Contextual factors that this research highlights to be important to the incorporation of CSR into governance include the economic environment, national governance system, regulation and soft law, shareholders, national culture, behavioral norms and industry impacts [3]. The importance of the role of socially responsible investment in corporate social responsibility is represented by the arrow flowing from institutional investors to companies.
Leadership is crucial for company positioning on strategic environmental and social issues and can be shown through accountability and transparency in reporting and incentive schemes.
• Employee recruitment and retention is needed in a world of human capital shortages. Superior policies and practices on compensation, career development, health and safety, and labor standards will be needed to win the war for talent.
• Stakeholder relationships are critical to maintaining reputation and the license to operate, from community investment and philanthropy to business ethics and corruption, to responding to shifting consumer needs and supply chain management.
2. Socially responsible investment in an international context according to the corporate governance (CG).
Institutional investors, who tend to have a longer investment time horizon, are increasingly showing signs of interest in ESG (environment, social, and governance) factors. These investors more and more are expressing their expectations for corporate disclosures beyond what is currently provided in financial reporting. Factors influencing investors' incentives to monitor.
Country-specific factors:
a) Legal and regulatory system; b) Institutional arrangement.
Investor-specific factors:
c) Investment horizon; d) "Corporate culture".
The origins of socially responsible investing may date back to the Religious Society of Friends (Quakers). In 1758, the Quaker Philadelphia Yearly Meeting prohibited members from participating in the slave trade — buying or selling humans.
As we know Socially Responsible Investing (SRI), or Social Investment (SI) is also known as sustainable, socially conscious, "green" or ethical investing, is any investment strategy which seeks to consider both financial return and social good to bring about a social change. In general, socially responsible investors encourage corporate practices that promote environmental stewardship, consumer protection, human rights, and diversity. The USA is a strong advocate of socially responsible investment. It is considered that ethical investment originated in the USA among a number of church groups and grow in importance with public reaction to the Vietnam War in the 1970.In 1992 over USD 500 billion of US institutional investment was invested accorded to some level of social screening.
3. Socially Responsible Investors (SRI) and Factors influencing corporate governance activities.
The most concerning gap in the institutional structure concerns the engagement with foreign investments. The legal and regulatory environment plays a very crucial role in determining the success of any businesses. The government imposes taxes among other regulatory measures to promote economic growth and to cushion consumers from exploitation. Therefore, before establishing or when running a business, it is imperative to understand the role of regional tax measures and regulatory measures to determine how they affect your business. Understanding legal and regulatory measures also help you to adapt to your business environment and to account for all your regional economic analysis.
3.1 Institutional factors.
It is believed that some investors request the proxy advisors to use the investor's corporate governance standards rather than their own. There are of course difficult issues concerning cross border voting and costs that still need to be resolved including record dates too far in advance of a shareholders meeting [4]. Use of external fund managers, Size: large holdings, interrelated with investment horizon and investment strategy also makes for more active governance activities. Portfolio diversification: domestic and international. Passive vs. active investment strategy.Industry code or "best practise" guidelines. Internal guidelines or a commitment to exercise fiduciary responsibilities (e. g. voting) in accordance with published guideline. One person who has been demonized by proponents of corporate social responsibility is Milton Friedman. A free market economist, he believed that the only responsibility a company had to society was to
maximize returns to its shareholders.He adopted a purely agency theory (agency theory is the branch of financial economics that looks at conflicts of interest between people with different interests in the same assets) perspective of the company, believing that any attempt to statisfy stakeholders other than shareholder, where at best misguided (Friedman, 1962,1970). Moving to a record date for eligibility in 2005 has certainly underpinned this development and has also stimulated foreign investors. There have also been a number of occasions when domestic institutional investors have shown their displeasure with actions being carried out by companies.The rules governing co-operation between investors have been clarified since 2009 but still remain potentially restrictive. This is because they seek to prevent investors from seeking to "influence a company's strategic orientation in a permanent and strategic manner".
4. Conclusion.
Institutional investors have invested traditionally in mainly "shares and other equity" (includes quoted shares, unquoted shares, other equity, and mutual fund shares).Institutional investors acting in a fiduciary capacity should disclose how they manage material conflicts of interest that may affect the exercise of key ownership rights regarding their investments [5]. At the same time, institutions should disclose what actions they are taking to minimise the potentially negative impact on their ability to exercise key ownership rights. Such actions may include the separation of bonuses for fund management from those related to the acquisition of new business elsewhere in the organisation [6].
References:
1. Aguilera, R. V., Williams, C. A., Conley, J. M., & Rupp, D. E. (2006) Corporate governance and social responsibility: A comparative analysis of the UK and the US. Corporate Governance: An International Review, 14, 147-158.CrossRef.
2. Bushee, Brian J. (1998), "The Influence of Institutional Investors on Myopic R&D Investment Behavior", Accounting Review 73 (3): 305-333.
3. Cadbury (1992), "Report of the Committee on the Financial Aspects of Corporate Governance", Gee Publishing, London.
4. Combined Code (2003), The Combined Code on Corporate Governance, Financial Reporting Council, London.
5. Financial Reporting Council (2012), "UK Stewardship Code" available at URL: http://www.frc.org.uk.
6. Ahlering, Deakin (2006), Institutional Investment in the UK.
