Hermes Essay

385 Words2 Pages
Hermes Fund Management Is it the role of institutional investors to influence the strategy of companies in which they invest? Institutional investors like mutual funds act in the interest of many smaller investors who are seeking low-risk investment. They have the right to influence strategy and to threaten to take their business elsewhere if they are not satisfied. Hermes is Britain’s most influential fund Manager’s company and has a critical and proactive role to play in the governance of companies. Hermes believed in successful stewardship involving using its vote in approving the board of directors. Its aim is to lead in promoting better management and intervening in companies which were failing to resolve critical issues such as board structure, strategic direction, capital structure, and corporate governance, problems in company’s management. Their objective is to maximize the returns to its shareholders. The company is concerned about governance, ensuring that the board of the company had the right mix of entrepreneurship, expertise and independence to maximize the company’s values. They possess the necessary resources to build the monitoring capabilities and have better access to information. They have the ability to demand meetings with the senior management of companies challenge them on concerned issues, discuss strategies for achieving the company’s goals and objectives. Should Hermes seek to influence Total with regard to their activities in Burma/ Myanmar? Hermes’ stance justifies interference in Total’s operations in a few ways. Total had a competitive advantage of operating in troubled countries. Hermes couldn’t persuade total to get out since they had a small shareholding. Total was a French company with good financial performance and underlying government support. It would be time consuming and costly for shareholders to put pressure on

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