New code pressures investors to engage
SHAREHOLDERS will have to take more responsibility for the companies they invest following today’s publication of the first ever Stewardship Code by the Financial Reporting Council (FRC).
The new code aims to create more transparency about how investors oversee the companies they own.
FRC chairman Baroness Hogg said she hoped the new code would be a catalyst for better engagement between shareholders and companies.
She said: “Disclosures made by institutions under the code should assist companies to understand the approach and expectations of their major shareholders.”
The FRC has urged companies to report publicly on the extent to which they meet the requirements of the code and said that by late September, it plans to publish a list of compliant companies on its website.
Jennifer Harris, managing director at JRBH said: “Will this provoke a change in behaviour? It should already be in the shareholders interest to make sure the company is performing well. So this is a bit like reminding a pilot that he has to fly a plane.”
STEWARDSHIP CODE| INVESTORS SHOULD:
● Publicly disclose policy on how they will discharge their stewardship responsibilities.
● Have a robust policy on managing conflict of interest in relation to stewardship and this policy should be publicly disclosed.
● Monitor 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 companies where appropriate.
● Have a clear policy on voting and disclosure of voting activity.
● Report periodically on stewardship.