The Cadbury Code’s definition of corporate governance places great store on the notion of stewardship, with boards of directors responsible for “setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship”. Stewardship is back in the news, but this time the focus is on investors, with both the Financial Reporting Council (FRC) and the Financial Conduct Authority (FCA) engaged in efforts to improve shareholder engagement.

This new cross-regulatory focus on stewardship aims to hold investors to greater account, with all signatories required to make public disclosures about their stewardship activities and their assessment of how effectively they have achieved their stated aims. The new focus has come about because there have been concerns that the original Stewardship Code, which was launched in 2010, did not have sufficient bite to make a real difference.

Following the launch of the original Code, all UK authorised asset managers have been required, under the FCA’s Conduct of Business rules, to produce a statement of commitment to the UK Stewardship Code or explain why they have not yet done so. Initially, this approach met with limited success, and in 2016 the FRC categorised signatories into tiers based on the quality of their Code statements. Tier one signatories were considered to have demonstrated a good quality and transparent approach to stewardship. Those failing to achieve at least tier two status after six months were deemed to have demonstrated a lack of commitment to the objectives of the Code and were removed from the list of signatories.

Jul-Sep 2019 Issue

ICSA: The Governance Institute