You are the company secretary of a listed food manufacturing company. Your Chairman informs you that he has been asked to meet with two major shareholders of the company. They are institutional investors who together own

Institutional investors are those financial institutions which accept funds from other parties for investment by the institution in its own name but on their clients/ beneficiaries behalf. The different kinds of institutional investors are banks, development financial institutions, insurance companies, mutual funds, foreign institutional investor, provident funds and proposed private fund managers. They are now significant players in the global economy. Institutional investors are entrusted with funds from the public and most of the household income is with these institutional investors. They are safe keepers of public money and act in a fiduciary capacity. They are obligated to take decisions which best serve the company's' interests and steer the company to function in an ethical manner. There is a mutual relationship between institutional investors and the good corporate governance of a company. The corporate governance practices followed by a company are very important to determine the number of institutional investors who would like to invest in the firm and the extent to which they would like to invest. Institutional investors, being shareholders with large concentrated shareholding have the power to get involved with good corporate governance practices. Institutional investors are major contributories of companies in India. The recent government policies have led to an increase in the flow of Foreign Direct Investment and Foreign Institutional Investment in India. Institutional investors are becoming important components of companies. Though institutional investor activism is not prevalent to such a great extent in India, but it is gaining importance. Institutional investors play a proactive role in the corporate governance of companies in the United State and U.K. They monitor the decisions of the Board and help in building effective corporate governance practices in the firm. Most governance sensitive institutional investors would like to invest in firms which already have their governance mechanisms in place. Institutions with corporate governance mechanisms in place are better to invest in as this would mean decreased monitoring costs. The institutional investors would not have to play a proactive role in monitoring the practices followed by the company.