The lack of a clear steer from asset owners is hindering the take-up of the UK’s Stewardship Code, a senior European Commission official told the International Corporate Governance Network conference in London.
“The absence of clear mandates from asset owners on engagement – this is clearly detrimental to the correct impact of the code,” said Eric Ducoulombier, Acting Head of Unit, Corporate Governance and Social Responsibility at the European Commission’s Internal Markets directorate.
He was “not yet ready to conclude” that the two-year old code has been a “positive experience” in terms of boosting shareholder engagement with corporates.
“It’s far too early to draw definitive conclusions as to whether it has secured its objectives,” Ducoulombier told delegates.
His comments came as a new poll showed that 79% of FTSE 350 companies have seen no increase in meaningful engagement post-Stewardship Code. Just one in 10 firms had met all their top 10 shareholders in the past year.The Commission is currently putting together its thoughts and any proposals will be released by the end of October.
Ducoulombier stressed that the Commission is “not obsessed” with regulation but his remarks are a pointer to its current thinking. Further regulation will be seen as a burden by investors. Any initiatives are likely to focus on how to get asset managers to engage, the “appetite” of boards to engage with investors and clarity around acting in concert rules.
Baroness Hogg, the chairman of the Financial Reporting Council which oversees the Stewardship Code, said there had been some change “but clearly not enough”. The FRC is lobbying to keep the existing ‘comply or explain’ regime. “We need to keep momentum or there’s a real risk of a return to business as usual,” she told the conference. “If we can’t show this we’ll be very weak vis-à-vis Brussels.”
She also urged the investment community to consider making themselves available for “collective consultation” by companies in times of crisis.