In the wake of the banking crisis, regulators and politicians have called on large institutional shareholders to become more engaged with the companies in which they invest. In general, I support this. However, I believe that what is appropriate for banks isn’t necessarily so for all companies.

Banks are more complex and can be more risky than other companies. In my 38 years in the City, I have seen five major banking crises. This type of crisis can develop much faster than within most other industries. At the heart of banking is confidence and this can, at times, be a very fragile commodity.

With other companies, I believe that, most of the time, large institutional investors such as Fidelity should take a close interest in a company’s affairs but not try actively to influence its direction – except through the routine process of voting shares.

Our process when assessing companies in which we are invested, or looking to invest, is quite demanding of managers’ time. It requires the chief executives or chief finance officers to attend regular meetings with our investment managers and analysts.

Part of being an involved and responsible shareholder is, as well as voting our shares, to be prepared to give feedback to management – on matters such as board composition, remuneration or strategy. When we have definite views, we are happy to share them, either directly with management or indirectly through their investment bank.

However, there are times when we are prepared to engage with a company’s management to achieve a course of action that we have instigated.

Engagement is not something to be embarked on lightly, as it takes time and resources to do it successfully and responsibly. It needs the right people to lead it and these are not necessarily fund managers themselves.

Nearly always when we engage with a company on a particular matter, we first check to see if other large shareholders have similar views – we rarely engage without wider support. If one or two indicate that they are sympathetic to our views, this will add weight to our dialogue with the company.

Our conversations are conducted confidentially as we have found that this is more productive for everyone.

Reasons for engagement nearly always revolve around two key topics: board composition and strategy.

With boards, our focus is on the chairman and chief executive roles. We normally prefer non-executive, independent chairmen. With strategy, topics of particular interest are acquisitions and disposals and whether a company should remain independent or actively seek a takeover or merger.

Engagement is generally easier with small and medium-sized companies where shareholder lists tend to be more concentrated. With very large companies, in which no shareholder owns more than a few per cent of the equity, it can be more difficult. Even in these situations, a significant part of the shareholder register can be owned by short-term passive hedge or quantitative funds or passive index funds, meaning that more active shareholders such as Fidelity can have greater influence than a small percentage shareholding might at first indicate.

That said, while most engagement ultimately leads to a consensus outcome, there are practical limits to the ability of shareholders to force change on reluctant companies.

As I have argued in a previous column, changing the chief executive of a FTSE 100 company is not easy, particularly if the board does not already have reservations. Also, it is not a task to take on lightly, as the very act of questioning whether a chief executive is appropriate can destabilise a company. In such a case, discussions with the chairman or senior non-executive are vital.

The chairman’s role is very important and, although we do not ask for regular meetings with chairmen, we like to feel that we can always have one if required. In cases involving a chief executive’s competence, having an independent chairman makes the whole process easier.

I believe the prospect of engagement can give the funds we manage a real competitive advantage over more passive investors, particularly when a company is not doing as well as it might. There has been huge progress in the whole area of corporate governance – although we do need to re-examine our system from time to time to see if we can make improvements. However, in general, Britain should be proud of its corporate governance system, which I believe is more effective than in many other countries.

Anthony Bolton is president, investment, at Fidelity International. Under his management, the Fidelity Special Situations fund was the top performer in its sector from its launch in 1979 until he stepped down at the end of 2007. Next column: September 5