ABSTRACT
This chapter describes the sovereign wealth funds (SWF) phenomenon with a focus on the significant changes that have propelled these institutions to the forefront of debate in the global capital markets: their rapid growth and shift in investment strategy. It explores the two faces of SWF equity investments—one benign, the other threatening. The chapter presents minimalist solution—vote suspension for SWF equity investments. It explains why this solution responds to the potentially threatening side of SWF investments while leaving the benign face undisturbed. The chapter examines the limitations of solution, and also explains why these limitations are outweighed by the benefits of vote suspension. If an SWF shareholder's influence depends on its ability to vote its shares, then the obvious means to prevent strategic behavior—behavior that benefits the SWF or its sovereign owner in ways that do not proportionately benefit other shareholders—is to restrict an SWF's right to vote.
