Stewardship Code signatories to be given chance to improve quality of engagement with companies before being named
The UK’s Financial Reporting Council (FRC) will name and shame asset managers that have signed the council’s Stewardship Code but are failing to engage more with companies and take other measures to help ensure high-quality reporting and good governance.
The FRC says it will create a tiered system starting in July next year that will publicly reveal the fund managers that are not living up to their commitments under the code, in efforts to push companies to improve long-term prospects. Win Bischoff, chairman of the FRC, says some of the 304 firms that signed the Stewardship Code when it was created in 2010 in the wake of the financial crisis have not been living up to their commitments and must be held accountable.
‘The Stewardship Code has helped to raise the profile of stewardship, normalized discussions about stewardship in the investment chain and led to improvements in the quality and quantity of engagement between investors and companies,’ Bischoff writes on the council’s website. ‘We wish to maintain momentum by ensuring that signing up to the Stewardship Code is a true marker of commitment.’
Before the FRC makes public its assessment of the performance of those firms that signed the code, it will contact the firms to be named and shamed to allow them time for improvement, according to the statement on the FRC website.
Firms that have signed the code include BlackRock, BNP Paribas Investment Partners, Credit Suisse UK, Fidelity Worldwide Investment, Franklin Templeton Investments, Hermes Fund Managers, Mitsubishi UFJ Asset Management, State Street Global Advisors, and others.
One of the code’s guiding principles states that ‘for investors, stewardship is more than just voting. Activities may include monitoring and engaging with companies on matters such as strategy, performance, risk, capital structure and corporate governance, including culture and remuneration. Engagement is purposeful dialogue with companies on these matters as well as on issues that are the immediate subject of votes at general meetings.’