Disadvantage of shareholder involvement. Investors may not choose to intervene because doing so would violate legal regulations. An example would be that diversification requirements for mutual funds or pension funds may not allow investors to take a large enough stake to incentivize commitment. “Acting in concert” rules may also discourage engagement because they pose legal risk to investors coordinating the engagement. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay Finally, disclosure regulations (e.g., “Regulation Fair Disclosure” in the United States) may discourage investors or managers from engaging. Increased regulation could reduce the quality of engagement. Risk that further regulation in governance will be counterproductive, leading to more controls and standard reporting rather than more effective engagement. However, institutional investor activism mostly happens behind the scenes[4], making it very difficult to detect. Subsequently, further research in this area is of utmost importance. Furthermore, do shareholder activism and involvement have positive effects? Several academics believe in an overall positive effect of shareholder activism. However, the evidence remains limited. Academic research has also highlighted evidence of more long-term oriented shareholder engagement by hedge funds, but the question remains how, if at all, the (alleged) short-term orientation of shareholder engagement might be addressed. shareholders. Furthermore, recent theoretical models even show a more beneficial outcome of activism through exit compared to activism through voice. There is a wide range of investment managers. In 2001, Paul Myners, who was just concluding his term as chairman of the board of pension fund manager Gartmore, published a government-commissioned report on institutional investment in which he expressed concern about the reluctance of fund managers to actively engage with the companies in which he held shares.[7] Hedge funds don't give a damn, they just want to know about short-term stock price movements. At the opposite end of the spectrum are activist companies, they are in the minority but vocal.[8] Similarly, fund managers investing on behalf of institutional investors are equipped to focus on business decisions and are therefore neither incentivized nor resourced to act as "owners".[9] Furthermore, institutional investors, as custodians of other people's funds, generally prefer not to be "locked in" by an intervention policy and instead want ample room to offload underperforming assets when appropriate.[10] Governance remains important to most equity investment firms, although only a few cite it as an important part of their investment process and there is concern about a lack of interest from clients.[11] They believe their clients have little interest in their governance engagement work, while the vast majority of shareholders are not very interested in governance. The disadvantage of involving shareholders is that most of them will not have information about the company's managers and another source of doubt is that of the level of experience of institutional investors.[12] One of the arguments is that shareholders have an information disadvantage vis-à-vis the.[31]