Institutional Investor Activism in the Trump Era: Responses to a Changing Landscape

November 16-17, 2018

Boston University School of Law
765 Commonwealth Ave
Boston MA  02215

Over the past decade, institutional investors have emerged from the shadows, transforming themselves from once passive shareholders to active stewards of their investments. The most profound reforms produced by the corporate governance movement have been driven by such investors. These institutions’ relationships with each other have also become more important and more fraught with public pension funds, mutual funds, hedge funds, and private equity funds pursuing objectives that sometimes cohere and sometimes clash. Finally, institutional investors have played a key role in shaping legislation and regulation. Institutional investors thus face challenges on three fronts: in their interactions with corporations, with other investors, and with government.

The Trump Era poses new opportunities and new challenges for institutional investors. On the one hand, record-setting stock prices are rapidly restoring balance sheets damaged by the financial crisis of 2007-2008, taking the pressure off some issues that have haunted shareholder activism for the past decade, such as public pension underfunding and the hunt for market-beating alternative investments. On the other hand, the Trump era has brought with it a more hostile attitude towards shareholder activism and shareholder rights. The House of Representatives has adopted the Financial Choice Act which, among other things, poses an existential threat to shareholder proposals, sharply limiting one of the key tools these investors deployed in the corporate governance movement.

The possibility of mandatory arbitration provisions eliminating shareholder lawsuits, seemingly defeated, has been revived by two SEC Commissioners’ invitation to companies seeking an IPO to include arbitration provisions in their charters. Proposed regulation of proxy advisory firms like Institutional Shareholder Services may have profound effects on institutional investors and how they vote. In addition, sharp political changes in Washington have increased political pressure on investors, prompting enhanced support for the use of investment power to address politically-tinged issues ranging from the environment to infrastructure investment to the diversity of corporate boards. How should institutional investors navigate these challenges? What can we learn from their past behavior that can inform us about how they will and should move forward?

All – including not only professors, law students, graduate students, and undergraduates, but also alumni and the general public – are welcome to attend the conference.