Disadvantage of shareholder engagement. Investors cannot choose to intervene because to do so would violate legal rules. An example would be that diversification requirements for mutual funds or pension funds might not allow investors to take a large enough stake to encourage engagement. Rules relating to “acting in concert” may also discourage engagement because they involve legal risk for investors coordinating engagement. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get an original essay Finally, disclosure regulations (e.g., “Regulation Fair Disclosure” in the United States) may discourage investors or managers from engaging. Increased regulation could reduce the quality of engagement. There is a risk that further regulation in the area of ​​governance will be counterproductive, leading to more box-ticking and boilerplate reporting rather than more effective engagement. However, institutional investor activism mostly takes place behind the scenes[4], making it very difficult to detect. Therefore, further research in this area is of utmost importance. Furthermore, do shareholder activism and shareholder engagement have positive effects? Several scholars believe that shareholder activism has a generally benign effect. However, the evidence remains limited. Academic research has also highlighted longer-term shareholder engagement from hedge funds, but the question remains how the (alleged) short-term nature of shareholder engagement could be addressed, if at all. . Moreover, recent theoretical models even show a more beneficial outcome of exit activism than of voice activism. There is a wide range of investment managers. In 2001, Paul Myners, who was just finishing his term as chairman of the pension fund manager Gartmore, published a government-commissioned report on institutional investment in which he expressed concerns about the reluctance fund managers to actively engage with companies in which they had holdings.[7] Hedge funds don't care, they just want to be informed of short-term stock price developments, at the opposite end of the spectrum, they are the activist companies, they are in the minority but noisy.[8] Similarly, fund managers who invest on behalf of institutional investors are designed to focus on business decisions and are therefore neither incentivized nor resourced to act as an "owner".[9] Furthermore, institutional investors, as custodians of other people's funds, generally prefer not to be "locked in" by an intervention policy and instead wish to have broad leeway to dispose of underperforming assets , if applicable.[10] Governance remains important to the majority of equity investment firms, although only a few have cited it as an important part of their investment process and there are concerns about a lack of client interest.[11] They believe that their clients have little interest in their governance engagement work and that the vast majority of shareholders do not have much interest in governance. The disadvantage of shareholder engagement is that the majority of them will lack information about the company's management and..[31]