1. What are institutional investors? Give examples of institutional investors.  How are institutional investors different from individual investors?


Institutional investors buys securities, real property, and investment assets. Examples are banks, insurance companies, hedge funds, and mutual funds to name a few. Institutional investors are in the form of companies/firms, whereas individual investors buy and sell for themselves.



  1. What are activist investors? Why has the presence of activist investors on corporate boards failed to produce better financial returns for companies?


An activist investor is an individual or group that purchases large numbers of a public company’s shares and/or tries to obtain seats on the company’s board with the goal of effecting a major change in the company. They fail to produce better financial returns in the long-term because of the corporate governance conflicts of interest between the board members, stockholders, and management. They all have different motives. The motive for the activist investors is making the changes needed within the organization to turn a profit, and then get out.



  1. Should CEOs focus on long term or short term financial performance? Why? Explain.


CEO’s should maintain a focus on long and short term goals. Depending on what the CEO is trying to achieve with the company and where they are trying to put them at financially. Focusing on short term can manage stock prices and possibly keep stock prices higher and from fluctuating as much. Focusing on long term financial performance can help investors gain insight on the company and can put the company in a better position for financing and loans if needed.


  1. How can corporate boards get more backbone? Provide 2-3 recommendations.


Corporate boards need to hold their directors and project managers accountable for the results that the company is producing. The reason why activist investors exist is because they feel like their presence in the company’s board would improve the direction of the company. If corporate boards are able to produce results that make shareholders happy, they would have the accountability and their decisions wouldn’t be doubted.

In order to improve the results of the company, they need to set a clear standard for each segment in the company in order to reach the results they need. They may also need to alter their business level strategies and procedures to produce results more efficiently and at a higher quality.