Our Institutional Investors Activism Legal Thinking

Since the 1980s, the institutional investor activism has sprung up around the world, among which the performance of American institutional investors is particularly outstanding. Getting rid of their former practice of being passive investors, they began to take an active part in corporate governance, which promoted the perfection of the corporate governance structure to a large extent.From the year 2000, our country began to foster the institutional investors by means of supporting many conveniences for them, which brought about the flourish of the institutional investors. This flourish brought great opportunities to the solution of corporate governance problems. The attitude of the American institutional investors toward corporate governance experienced a change from passive to active, with the solution altered from singleness to diversity. Although our corporate governance problems differ from that of American's, the performance of American institutional investor activism is still of great realistic significance for guiding the institutional investors in our country to improve their corporate governance.Our corporate governance problems mainly stem from our unique ownership structure. Therefore, optimizing the ownership structure is an important path to the perfection of our corporate governance structure. By virtue of their natural advantages in terms of the number of shares and professional knowledge, the individual shareholders change their previous practice of voting with their foot toward expenditure cost, conversely, the institutional investors start to actively participate into the corporate governance. However, their participation is not only limited by the intrinsic factors such as their investment style, their own governance structure and the capital market subjective attributes, but also restricted by external constraints, such as policy environment, capital market environment and legal environment, which greatly weaken the positive influence the institutional investors exert on the improvement of corporate governance.Therefore, we have to clear the way for the institutional investors by way of identifying the institutional investors as trustees and specifying the obligations of the trustees as well as improving the corporate disclosure system. In addition, we should further improve the relevant laws such as proxy voting solicitation system and shareholder derivative litigation system, so as to protect the rights of the shareholders, reduce the cost of the shareholders'involving in corporate governance and guide the institutional investors to actively participate into corporate governance. Certainly, we should also realize the unique development patterns of the institutional investors in our country. We should base on the practice to develop effective legal systems to regulate the behaviors of the institutional investors, furthermore, we should also promote the institutional investors to actively participate in corporate governance and make their practices legitimate.