The UK’s Financial Reporting Council released its new Stewardship Code last week. Here’s a round-up of some of the reactions.
Mark Burgess, Head of Equities, Legal & General Investment Management: “The next step in the process of creating better engagement has to be for the market to evolve the commercial aspects of this activity. Pension funds and other underlying owners need to recognise the costs involved in undertaking engagement work on their behalf, and the new requirements of the Code must also apply to all managers of funds – it is not appropriate for a few of the largest institutions who devote resources to governance to support “free riders” elsewhere in the market.”
Colin Melvin, Chief Executive, Hermes Equity Ownership Services: “There have long been concerns that the process of ‘comply or explain’ in the Corporate Governance Code for companies only works where there are active and engaged investors to hear the explanations and respond where they have concerns. The Stewardship Code sets out the standards for investors to measure up to in this respect.”
David Paterson, Head of Corporate Governance, National Association of Pension Funds: “Implementation of the Code does present some challenges for pension funds of all sizes. As a first step, funds should re-examine their approach to stewardship, and discuss with their advisers and investment managers how to apply the Code’s provisions to their own particular circumstances.
Richard Cranfield, chairman of global corporate practice, Allen & Overy: “Other than being another piece of ‘best practice’ in UK PLC, it’s unlikely to achieve that much and will have little resonance across the Channel or the Atlantic.“Simon Wong, Managing Director at Governance for Owners: “I think it is rather disappointing that, in light of findings that institutional investor monitoring of investee companies was deficient, the FRC has decided not to strengthen the ISC code at this juncture, as a number of commentators have advocated.”
Ian Sayers, Director General of the Association of Investment Companies: “Effective engagement should increase the understanding between companies and shareholders and ultimately help secure better long-term returns. This will only be possible where both boards and investors are prepared to enter into a constructive dialogue. Today’s developments should make a ‘tick-box’ approach to governance a thing of the past.”
Mark Goyder, founder of Tomorrow’s Company: “It’s like a menu without prices, because it does not define stewardship or offer clear criteria for assessing fund managers on their stewardship. Investors seem to think stewardship means voting or subcontracting their judgment to a proxy agency.”
Alan MacDougall, Chief Executive, PIRC: “A step-change in needed in the transparency and accountability of the proxy advisory sector. It is perfectly reasonable for companies to seek the same level of openness from us that we expect of them. A commitment by all voting advisers to publicly disclose their voting recommendations would be an obvious place to start.”
Kerrie Kelly, Director General of the Association of British Insurers: “We welcome the FRC’s commitment to work with the new Institutional Investors Committee. Other long term investors, such as sovereign wealth funds, should be encouraged to adopt the Code.”