Stewardship Code
Encyclopedia
The Stewardship Code is a set of principles or guidelines released in 2010 by the Financial Reporting Council
directed at institutional investors who hold voting rights in United Kingdom
companies. Its principal aim is to make shareholders, who manage other people's money, be active and engage in corporate governance
in the interests of their beneficiaries.
The Code adopts the same "comply or explain" approach used in the UK Corporate Governance Code. This means, it does not require compliance with principles. But if fund managers and institutional investors do not comply with any of the principles set out, they must explain why they have not done so on their websites. The information is also sent to the Financial Reporting Council
, which links to the information provided to it.
The compulsion to, at the very least, explain non-compliance with the Code follows from the Financial Services and Markets Act 2000
section 2(4) and the Listing Rules.
Financial Reporting Council
The Financial Reporting Council is the UK's independent regulator responsible for promoting high quality corporate governance and reporting to foster investment.-Structure:...
directed at institutional investors who hold voting rights in United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
companies. Its principal aim is to make shareholders, who manage other people's money, be active and engage in corporate governance
Corporate governance
Corporate governance is a number of processes, customs, policies, laws, and institutions which have impact on the way a company is controlled...
in the interests of their beneficiaries.
Preface
The Code applies to "firms who manage assets on behalf of institutional shareholders such as pension funds, insurance companies, investment trusts and other collective investment vehicles." This means fund managers, but the Code also "strongly encourages" institutional investors to disclose their own level of compliance with the code's principles.The Code adopts the same "comply or explain" approach used in the UK Corporate Governance Code. This means, it does not require compliance with principles. But if fund managers and institutional investors do not comply with any of the principles set out, they must explain why they have not done so on their websites. The information is also sent to the Financial Reporting Council
Financial Reporting Council
The Financial Reporting Council is the UK's independent regulator responsible for promoting high quality corporate governance and reporting to foster investment.-Structure:...
, which links to the information provided to it.
The compulsion to, at the very least, explain non-compliance with the Code follows from the Financial Services and Markets Act 2000
Financial Services and Markets Act 2000
The Financial Services and Markets Act 2000 is an Act of the Parliament of the United Kingdom that created the Financial Services Authority as a regulator for insurance, investment business and banking.-Outline:...
section 2(4) and the Listing Rules.
Principles
The seven principles of the code are as follows. Institutional investors should,- publicly disclose their policy on how they will discharge their stewardship responsibilities.
- have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly disclosed.
- monitor their investee companies.
- establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value.
- be willing to act collectively with other investors where appropriate.
- have a clear policy on voting and disclosure of voting activity.
- report periodically on their stewardship and voting activities.
See also
- UK company law
- UK Corporate Governance Code
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- Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010