From Leo Strine:
To frame specific policy recommendations that align the responsibilities of institutional investors with the best interests of their human investors in sustainable wealth creation, environmental responsibility, the respectful treatment of stakeholders, and, in particular, the fair pay and treatment of workers, the essay: 1) explains how the corporate governance system we now have is fundamentally different than the system we had when the regulatory structures governing institutional investors were put in place; 2)identifies the suboptimal results that have ensued by increasing the power of institutional investors, and thus the stock market, over public companies, while diminishing the protections for other stakeholders and society generally; 3) discusses why leaving needed change to the industry itself is not an adequate answer; and 4) sets forth a series of specific, measured public policy changes for mutual funds, pension funds, and hedge funds. In sum, the essay explains and addresses the reality that companies that make products and deliver services cannot focus more on sustainable profitability, respectful treatment of stakeholders, and social responsibility than the powerful investors that control them permit. Like any powerful economic interest, institutional investors should be expected to be responsible citizens and faithful fiduciaries.
Strine, Leo, Stewardship 2021: The Centrality of Institutional Investor Regulation to Restoring a Fair and Sustainable American Economy (October 23, 2020). U of Penn, Inst for Law & Econ Research Paper No. 20-55, Columbia Law and Economics Working Paper No. 633, Available at SSRN: https://ssrn.com/abstract=3719145 or http://dx.doi.org/10.2139/ssrn.3719145
