Institutional investors form the major contributors in the companies in our country. The current plans and policies have resulted to a rise in the rate of flow of FDI and FII in the country. Institutional investors are turning into significant factors of companies. Even though the institutional investor policy is not that dominant in India, yet it is gaining significance. They play an active role when it comes to the corporate governance in US and UK.
They supervise the decisions taken by the Board and also facilitate in exercise of efficient corporate governance in the firm. Big institutional investors can communicate private data that they receive from the administration to other shareholders.
Institutional investors are basically shareholders with major shareholding and thus have the ability to get associated with good behaviours in corporate governance.[1] They are guardians of public money, and act in fiduciary relationship. They are obliged to make decisions that best fulfil the purpose and interests of the companies and guide it to perform keeping in mind the ethics and morals.
This chapter further will give a brief introduction to the historical background and also discuss the issues faced in the role of an institutional investor.
[1] Manya Srivardhan, Role of Institutional Investors in Corporate Governance, SSRN, published on April 19, 2009, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1391803&download=yes.
