Great Expectations from Pension Fund Activism: Insights from Poland

This chapter examines private pension funds'preferences for shareholder activism in Poland in closely-held firms that dominate stock exchanges in emerging markets. The results show that the major institutional investors engage in a limited spectrum of shareholder activities. Most often, they seek to contact the company's management board members as well as supervisory board members if they are dissatisfied with a portfolio company. None of the funds even considers public criticism or litigation. The form of shareholder activism selected by different funds and the sequence do not vary substantially due to the fact that all funds follow the investment strategy of the two largest funds. The reasons lie in internal benchmarking, which means that each pension fund is evaluated relative to the performance of all others in order to calculate the lowest acceptable return rate. However, the largest pension funds tend to be more active than the rest. They choose low-cost and low-risk forms of activism, but they avoid highly visible and confrontational activities.