Institutional shareholders are more and more significant in companies. Most of them have a large proportion of shares. So the role of institutional shareholders has been sparked debate in the world. Whether the institutional shareholders have the responsibility to influence strategy of company should consider the strengths and weaknesses of the institutional shareholders and comprehensive analyze the situation of their investee company. Positive institutional shareholders should be encouraged to make decision, because they would benefit the long-term interests of company and maximize the shareholders interests. However, negative institutional shareholders who only pursue immediate interests would have bad effect on company’s development.
In the case study, Hermes desired to intervene in Total’s activities of which invest in Burma. Total is giant French oil company with government support, but it had been claimed CSR problems and was laggard of reputation compared with the peers. Although Total has some competitive advantages in Burma, but Burma is unrest country and ruled by a military dictatorship, forced labors issue has not been solved yet, and few laws were passed to enforce this. So Total would face a lot of problems in Burma and difficultly gain profits. In addition, through the macro environment analysis and SWOT analysis, Burma is a trouble region where it is hard to operate company. Hermes realized this problem and seeks to persuade Total to reduce investment in Burma, which would be the positive behavior for both shareholders and company.
Table of content
3.0 Institutional shareholders3
4.0 The role of institutional shareholders4
4.1 The strengths of shareholders influencing on strategy of company7
4.2 The weaknesses of shareholders influencing on strategy of company8
5.0 The background of case study8
6.0 Macro environment Analysis of Total Oil in Burma9
7.0 SWOT analysis of Total Oil in Burma10
8.0 Should the Hermes influence Total’s activities in Burma?11
Over the past few decades, institutional shareholders or called institutional investor has a great change in investment strategy, which gradually transfers from negative investors to positive investors. At the same time, they pay more attention to long-term goals rather than short-term goals. In the corporate governance, the role of institutional investors is growing stronger. Through their shareholdings and financial claims, institutional investors act in the inside and outside management of company. This report is based on the case study written by Watson and Johnson (2010) which described the relation and issues of the Hermes Fund Management, Total and Premier Oil. The report mainly analyzed whether the institutional shareholders have responsibilities to intervene in the strategies of company in which they invest. Meanwhile it discussed whether Hermes should influence Total’s activities in Burma. Firstly, the definition and the role of institutional shareholders will be represented. Secondly, the strengths and weaknesses of shareholders influencing on strategy of company will be analyzed. Thirdly, the background and analysis of Total’s situation in Burma will be illustrated. Fourthly, whether Hermes should influence Total’s activities in Burma will be explained. Finally, the personal perspective and conclusion will be given. 3.0 Institutional shareholders
Institutional investors have become increasingly important in capital markets in 2000 year, which reached to around 1050 million investments and ranked the third (first is foreign investors of 1450 million, second is private investors of 1350 million, see Appendix 1). According to Chuhan (1994), Institutional shareholders as investors usually play an active role in corporate governance. The typical investors are bank, insurance...