ABSTRACT
This chapter focuses on the linkage by examining the significant role “Institutional Investors” could play in dealing with some of the weaknesses in the twin systems of corporate governance and pensions. Institutional investors have a potential to solve collective action problems of fragmented shareholding while keeping down the risk to outside investors of concentrated blockholding. The contracts to provide the consulting services come from the top managers of the very firms in which institutional investors are putting the funds of their investors. Corporate governance regulation is deeply political because it shapes who gets the cash flow of the firm. The politics of the corporate governance has been altered by the growth of pension fund holdings. Pension holders are increasingly affected by governance issues of firms in which they invested. The vulnerability of pensioners is this affected by weaknesses in the governance system.
