Results of the latest research

The State of Science

Research on shareholder engagement has increased significantly in recent years. Various disciplines are empirically analysing whether and how investors contribute to a more sustainable economy.

The key findings of the latest research are as follows:

  • Shareholder engagement leads to better corporate performance for society and the environment and to better financial results. The prerequisite for this is that the engagement does not revolve around trivialities, but around topics that are essential to the business model and strategy (Bauer et al., 2023).
  • Active shareholder engagement leads to changes in the targeted companies’ ESG ratings: companies with poor ratings improve as a result. Those with good ratings risk a negative correction if they are made aware of weaknesses. Companies that react openly and consistently to shareholder concerns also improve their financial performance (Barko et al., 2022).
  • The tactics used by investors are crucial. Not all forms of dialogue are equally effective. A distinction must be made between the phases 1) Establishing dialogue; 2) Developing solutions; and 3) Implementing solutions. For 1) it pays to point out problems unambiguously and to clearly articulate dissatisfaction. In the case of 2), on the other hand, a constructive approach aimed at good dialogue is more promising. Finally, in phase 3), plain language is required again (Beccarini et al., 2022).
  • Shareholder engagement has an especially strong impact on companies that are concerned about their reputation (Dimson et al., 2015).
  • Investor coalitions are particularly successful when they carefully tailor their composition, distribution of tasks and approach to the target companies’ receptiveness. The number of investors, the volume of jointly invested capital, the participants’ engagement experience and local contacts must be carefully balanced. It is not expedient, for example, to maximise the number of investors alone if they have little local experience with the target company. The so-called “tailor-to-target” theory for collaborative engagement is strengthened by these findings (Slager et al., 2023).
  • Systematic overview studies show that engagement does not follow one-dimensional, causal rules. One single initiative rarely leads to an immediate result. Shareholder and company interaction should rather be understood as a complex, dynamic and adaptive system. Contributions from different investors complement each other, lead to dynamic feedback loops with companies and thus mutually stimulate each other. Fans of systems theory can rejoice (Chuah et al., 2023).

Globalance regularly monitors developments in research. It provides us with valuable insights,
how we can continuously improve our own approach and make it more effective.

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