This study investigates the pattern of institutional shareholding in the U.K. and its relationship with socially responsible behavior by companies within a sample of over 500 UK companies. We estimate a set of ownership models that distinguish between long- and short-term investors and their largest components and which incorporate both aggregated and disaggregated measures of corporate social performance (CSP). The results suggest that long-term institutional investment is positively related to CSP providing further support for earlier studies by Johnson and Greening (...) (1999, Academy of Management Journal 42, 564–576) and Graves and Waddock (1994, Academy of Management Journal 37, 1034–1046). Disaggregation of CSP into its constituent components suggests that the pattern of institutional investment is also related to the form which CSP takes. Investigation of the impact of investment screens on the selection of stocks suggests that long-term institutional investors select primarily through exclusion, rejecting those firms which have the worst CSP. (shrink)

This study examines the relationship between pension fund ownership of companies and corporate social performance using a unique database of more than 500 publicly listed U.K. companies. The empirical analysis emphasizes the heterogeneous character of pension fund holdings and the multidimensional nature of corporate social performance. The results highlight that the characteristics of pension fund management are significant drivers of preferences for social performance and that employee-related aspects of social performance are preferred by pension funds.

This study examines overseas investing by U.S.-domiciled pension plans. The authors explore whether U.S. pension plans invest based on corporate social performance in a core overseas market, the United Kingdom. As a guide to social investing opportunities available to U.S. pension funds in the United Kingdom, their investments are compared to U.K.-domiciled pension plan domestic investments. U.S. labor union plan portfolios have a positive relationship with workplace practices, and U.S. private plan portfolios, with CSP’s community dimension. U.S. state and foundation (...) plan portfolios have no relationship with CSP. Other than union plans, U.S. pension plans stress corporate financial performance in their U.K. investments. U.K. union plan portfolios have a positive relationship with workplace practices, and U.K. state, foundation, and private plan portfolios with environment. (shrink)

This paper documents for the first time tournament incentives of pension fund managers and their preferences for social and environmental security characteristics. Using a comprehensive data set on pension fund security holdings, differences in manager tournaments are distinguished by sorting pension funds into portfolios based on the number of concurrent managers each pension fund employs. Results indicate that the way pension schemes structure portfolio manager tournament incentives is important in explaining the social and environmental portfolio firm characteristics of pension fund (...) held stock. (shrink)

This study examines the extent to which corporate responsibility influences the demand for shares by institutions. The study follows Bushee (Account Rev 73(3):305–333, 1998 ) in categorising institutions as dedicated or transient. The demand for shares is organised according to three factors: a long-term factor, corporate responsibility; a short-term factor, market liquidity; and a time-independent factor, portfolio theory. The rank and importance of the factors for the different types of institutional investor are analysed. For one of two types of dedicated (...) institution, corporate responsibility is as important as portfolio theory in influencing the demand for shares. For all dedicated institutions, corporate responsibility influences the demand for shares more than market liquidity. For two of the three types of transient institution, market liquidity is the most important factor in share selection. For all transient institutions, the least important factor is corporate responsibility. Findings suggest that corporate responsibility positively and significantly influences the demand for shares by dedicated institutions. The discussion considers the extent to which these trends are constitutive of significant shifts in ethicality within the context of institutional investment. Looking at this from within a highly institutionalised Anglo market model, dedicated institutions’ commitment to broader and longer-term concerns could be interpreted as a small but significant step towards a more axiologically informed ethical business practice. Such a form of engagement calls for sensitive attention to a fuller range of features deemed to be relevant to investment decisions, as opposed to more narrow reliance on legislation, codes of practice and fiduciary principles. (shrink)