Shareholder Responsibility – A Review of the Concept

This paper reviews the literature on the topic of shareholder responsibility, a concept that has received surprisingly little public attention. The challenge of the present-day investment chain, in which private individuals invest in capital markets through mutual funds and ETFs, is that it further diffuses responsibility. Institutional investors in today’s ‘asset manager capitalism’ carry greater responsibility than individual investors did in the past. This conceptual paper sets out the moral foundation for shareholders’ responsibility and describes how the responsibility of shareholding is diffused along the ‘investment chain’. It finds that the overall level of shareholder responsibility has increased as a result of the institutionalization of investment. Furthermore, while the ultimate owners retain some responsibility, the majority of responsibility has been shifted to the asset managers. Amongst institutional investors, a moral case can be made that the level of responsibility increases with assets under management. This paper therefore advocates institutional investors invest in expanding their corporate governance departments in order to ensure the continuity of their social licenses to operate and to avoid incremental regulation.