Search results

AbstractResearch question/issueThe paper examines private engagements related to environmental, social, and governance (ESG) incidents as a corporate governance mechanism used by Nordic institutional investors to influence MSCI World companies. The questions addressed are how an agent‐led collaborative engagement is carried out, what are the characteristics of the target companies selected, and if the successful engagements can improve ESG performance compared with pre‐engagement and incomplete cases.Research findings/insightsA unique data set of 355 private engagements of a professional agent on behalf of its Nordic clients is studied on environment, human and labor rights, and corruption risks between 2005 and 2013. An engagement process of the agent is described with focus on sequence and duration of actions of private engagement dialogues before filing a resolution. Successful private engagements, when target companies adopt the proposed ESG changes, are 27.6%. The incident‐driven private engagements target companies rated with high market values and ESG performance. ESG performance and transparency increase for succeeded engagements in the postengagement period and relative to incomplete engagements.Theoretical/academic implicationsThe paper provides empirical support for a social movement‐based influence of private engagements on target companies and adds to the broad‐scale empirical literature on investor activism. In the Nordic governance setting, an agent‐coordinated private engagement is seen as a social movement that supports targeting companies with a potential for change.Practical/policy implicationsInsights are offered to actors in the value chain in financial markets by demonstrating that successful ESG engagements have the potential to change portfolio company ESG practices.

This paper has two purposes: (1) to develop a theory about the impact of psychic distance on management control of multinational companies, and (2) to establish that psychic distance is an important factor for future research. We develop the concept of psychic distance, the interaction between geographic distance and culture, and test its impact empirically in a Finnish multinational company.Results show that psychic distance interacts significantly with reliance on budget control in multinational companies, but not in the manner proposed. High budget emphasis is associated with high subunit performance in countries with small psychic distances, but not in countries with larger psychic distances. Budget participation dilutes this impact. This study confirms that psychic distance is a relevant factor to be considered in future research.