Shareholder Engagement and Performance
Hans-Christoph Hirt, Associate Director-European Corporate Governance, Hermes Pensions Management Ltd, UK
The question of whether there is a link between shareholder engagement and performance is significant for a fund manager such as Hermes, which undertakes engagement work on behalf of a number of large pension funds. The corporate governance activities carried out by Hermes are based on the fundamental belief that companies with governance structures that allow shareholders to hold their management to account, and those that have active, interested and involved shareholders will ultimately perform better and be worth more than those where either of these factors is missing. At the very least, sensible corporate governance activities may prevent the destruction of value. Hermes believes that the key to the long-term success of a business is a constructive dialogue between companies and investors, commonly described as active ownership or better engagement. Management and boards which have a dialogue with and are accountable to their owners will tend to operate more effectively in the long term interests of the business and its investors.
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