Setting expectations: The low-cost tool transforming corporate influence

In March 2024, Norway’s $1.6 trillion sovereign wealth fund hit the headlines when it voted against the re-election of board chairs at firms that failed to meet its gender diversity targets. Far from just a symbolic gesture, this signaled a growing trend among international investors: leveraging their financial influence to push for changes in how companies are governed. 

Global investors such as BlackRock or Norway’s Sovereign Wealth Fund now hold significant influence, but the traditional methods of shareholder activism meant long, expensive battles—proxy fights, boardroom showdowns, or public campaigns. These tactics are usually impractical for such large financiers with stakes in thousands of companies. A less time-consuming, subtle and more scalable strategy is needed, and that comes in the form of expectation documents. 

These public position papers allow investors to articulate what they want from all the companies they invest in, without engaging each one directly. The challenge is knowing if one document can really influence thousands of firms without the need for confrontation.  

A new study by Ruth V. Aguilera (Visiting Professor at Esade and Professor at D’Amore-McKim School of Business), Vicente J. Bermejo (Assistant Professor at Esade), Javier Capapé (IE University), and Vicente Cuñat (The London School of Economics) suggests it can. It has been published in The Review of Corporate Finance Studies. 

What are expectation documents?

Expectation documents are exactly what they sound like: public statements issued by large investors outlining the standards they expect companies to meet. These expectations usually set recommendations and criteria regarding corporate governance. They set goals for things like board independence, minority shareholder protection, and executive accountability. 

Expectation documents discreetly influence corporate behavior without spending resources on aggressive or high-profile activism

They aren’t entirely new. BlackRock’s Larry Fink has been sending his version—annual letters to CEOs—for several years. And in 2012, Norway’s sovereign wealth fund, managed by Norges Bank Investment Management (NBIM), released a governance expectations document. The Norwegian fund is the largest in the world, holding 1.5% of all listed equities. Given the fund’s global interests, setting expectations is a positive step, but has it made a difference? Until recently, there has been little research into whether these declarations actually had any impact on company behavior. 

Tracking the outcomes of expectation documents

The NBIM’s 2012 expectations document created a natural experiment for the research team: they could test whether firms and the fund itself changed behavior in response. The fund’s note published urged companies to strengthen board oversight and protect minority shareholders. The researchers tracked nearly 9,000 companies globally and evaluated their reactions. 

The findings were striking. Many companies improved their governance practices in line with NBIM’s expectations. Smaller firms with weaker financial performance were especially responsive, which is positive news as they are typically the hardest to engage with. The public expectations document bridged an important communications gap. 

The fund itself also adjusted its portfolio strategy. More capital was allocated to firms with governance profiles that aligned with the expectation document’s goals. This was the case even if it resulted in lower financial gains for the fund in the short term. The fact that the fund was prepared to prioritize governance quality over short-term returns is a significant indicator of genuine commitment to systemic change.  

“Expectation documents provide a low-cost way for universal investors to push for better corporate governance across entire markets,” says Vicente Bermejo, professor in the Master in International Management at Esade. 

Global market impact

Universal investors—such as pension funds, sovereign wealth funds, and index fund managers—like BlackRock, Vanguard, and the Japanese Government Pension Investment Fund—are just a few examples of investing entities that own shares in thousands of companies across dozens of countries. In the context of today’s global economy, these universal investors can collectively have a significant influence on the governance of companies.  

Expectation documents may be a channel to enact global changes in governance or ESG stances

Investor success is no longer defined by profit alone. Stakeholders now expect institutional investors to be a responsible force in shaping conscientious corporate behavior, not only on governance, but also on environmental and social issues. The problem with traditional engagement methods is that they don’t scale well when you’re managing trillions of dollars and tens of thousands of holdings. 

The study shows that expectation documents offer a pragmatic solution. They permit investors to broadcast their priorities across their portfolio, discreetly moulding corporate behavior without spending time, money and energy on aggressive or high-profile activism. 

Limitations and new developments

That said, expectation documents are not a panacea—their impact isn’t universal. Company responses varied depending on factors such as the size of the firm, financial health, and the legal and regulatory environment in their home country. 

Still, the results are meaningful. NBIM's willingness to shift investments—even at the cost of some financial returns—demonstrates the power of these documents as part of a broader, long-term investment strategy grounded in stewardship and risk management. 

Since that 2012 governance document, NBIM has issued expectation documents on climate change and human capital, calling for companies to produce credible transition plans and to invest in employee wellbeing, diversity, and long-term talent development. 

They are not alone. The Institutional Investors Group on Climate Change (IIGCC), and Climate Action 100+ have all used similar documents to relay their expectations on ESG issues—on everything from net-zero targets to board-level climate oversight and non-discriminatory labor practices. 

Not long ago, BlackRock was part of these efforts. In his 2020 letter, the firm’s CEO Larry Fink wrote: “We will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.” More recently, however, BlackRock has joined a broader move among large investment firms to scale back ESG initiatives amid conservative political pressure in the US. 

A more accountable future

As global investors continue to seek influence beyond financial returns, expectation documents are emerging as a promising tool. They are public, scalable, and serve as an effective nudge to businesses, especially those that might otherwise fly under the radar. Firms are moving towards stronger governance and more responsible corporate behavior. 

As the study authors state: “Given their universal nature, expectation documents may also be a channel to enact global changes in governance or ESG stances, especially those that require certain coordination across firms.” 

As today’s stakeholders demand better governance, ESG practices, and increased transparency, expectation documents could be a key factor in shaping the future of corporate stewardship.