FRC strengthens Stewardship Code
The Financial Reporting Council has published a consultation paper on a new Stewardship Code that sets substantially higher expectations for investor stewardship policy and practice. The proposed changes call for higher transparency regarding institutional investors’ stewardship activities and encourages more engagement with issuers (ie companies). The FRC and the FCA have also published a discussion paper “Building an effective regulatory framework for stewardship”.
Among the proposed changes to the Stewardship Code, which broaden its scope and require signatories to make public disclosures about their stewardship activities, there is an increased focus on the societal purpose and responsibilities of investment institutions. There are explicit links to the new UK Corporate Governance Code, which came into effect this year, as well as the EU Shareholder Rights Directive II, expected to be implemented in May. Behind the scenes, the US Stock Exchange Commission hosted a roundtable on the proxy process in November and BlackRock’s Larry Fink’s letter to CEOs last month encourages companies to establish a purpose and embrace their social responsibilities.
The proposed changes have significant consequences for investment organisations and the companies in which they invest. MM&K will be studying the new Code and researching the context surrounding it in depth. We will be publishing our insights and guidance for boards of directors in next month’s newsletter.
Contact Harry McCreddie for further information.