Do Trading Mechanisms Offer a More Effective Approach to Institutional Investor Engagement than the Current Reliance on Conversation-based Engagement

A comprehensive investigation and analysis of whether trading mechanisms offer a more effective approach to institutional investor engagement than the current reliance on conversation-based engagement (investor 'voice') within the UK's regulatory regime for corporate stewardship.
Aims
1.To contribute to the current debate surrounding institutional investor activism;
2.To scrutinize the effectiveness of the Stewardship Code and its reliance on investor 'voice';
3.To develop a clearer understanding of the role played by trading mechanisms in stewardship;
4.To ensure that UK-based institutional investors do not lose their ability to influence the environmental, social and governance policies of investees; and
5.To devise and propose further reform of the Code.

Methodology
Literature Review
This review will involve an in-depth analysis of the Code that will describe, summarise, and critically evaluate the relevant literature concerning its effectiveness and weaknesses. Additionally, the literature concerning 'shareholder activism' will be evaluated in order to summarise the importance of effective stewardship. Furthermore, the relevant literature on the use of trading mechanisms as an approach to stewardship will be considered. Moreover, the literature on institutional investors engaging in certain types of trading will be examined along with the potential benefits of such activity.
Quantitative Research
To accurately investigate the extent to which investor voice is privileged over the use of trading mechanisms as an approach to stewardship, an empirical study will be necessary. This will involve the creation of a dataset containing information on 'specific investment events', 'specific investor 'voice' engagement events' and subsequent textual 'strategic governance change.' Each 'investment event' and 'voice' event will be matched to a 'strategic governance change' if one occurred, in order to assess the impact of each method of engagement. An example of such an event would be when Stuart Rose, the then CEO of Marks and Spencer plc, decided to take on the role of Chairman of the Board, as well as CEO, contrary to the provisions of the UK Combined Code. Various institutional investors publicly announced their discontent. This data will be collected from a number of sources, such as the disclosures of institutional investors under the Codes updated requirements, the Principles for Responsible Investment reports , S&P Capital IQ and S&P SNL.
Research Questions
This project will involve the consideration of the following questions:
1.To what extent has the re-formulated Code addressed the weaknesses that were highlighted in the previous iteration?
a.What are the Code's limitations?
b.Are there gaps in the Code's application?
2.Is engagement via investor 'voice' an approach that should be promoted by the Code, i.e. is the idea of 'shareholder activism' via investor 'voice' a worthwhile endeavour?
3.How deep does reliance on investor 'voice' run in the approach to the Code adopted by institutional investors?
4.To what extent are trading mechanisms used by institutional investors in their approach to stewardship?
5.How might trading mechanisms provide a more fruitful approach to stewardship than the current reliance on investor 'voice'?

Outcomes
This project will contribute to scholarship in the area of institutional investor activism in a unique way by examining trading mechanisms as an alternative and underappreciated approach to stewardship. The effectiveness of the Code will be examined in detail and a number of proposals for reform will be defined so that market-based investor engagement plays a more active role within the Code, resulting in more effective oversight and enhanced influence concerning environmental, social and governance policies.