A new five-principle voluntary ‘stewardship code’ has been launched by investor and business groups in Switzerland, in the latest attempt to structure the way investors interact with companies.
The guidance has been put together as a “pragmatic Swiss approach” by the country’s pension fund, business and banking associations and others.
It’s hoped that the 13-page ‘Guidelines for institutional investors governing the exercising of participation rights in public limited companies’ will achieve broad recognition and support.
The authors say they hope that the investment community will acknowledge and welcome the guidelines, saying: “It is their own interests that are at stake, as well as those of Swiss listed companies and ultimately the smooth functioning of the market and the Swiss economy in general.”
The guide follows the UK’s Stewardship Code, South Africa’s Code for Responsible Investing in South Africa (CRISA) and comes on the heels of the European Commission’s corporate governance Action Plan.
It was put together by pension fund association ASIP, business federations Economiesuisse and SwissHoldings, pension fund-owned governance advisor the Ethos Foundation and the Swiss Bankers Association.
The team putting the guidance together included two senior figures from food giant Nestlé, General Counsel Michèle Burger, and Executive Board Member David Frick.
Other figures involved include Ethos Director Dominique Biedermann, ASIP President Christoph Ryter, Markus Steiner, the former CEO of UBS Fund Management (Switzerland), and Christoph Zimmermann at the Swiss Federal Social Security Funds.Notably, principle five calls for institutional investors to issue a report at least once a year summarising how they have exercised their ownership rights – although they do not have to disclose details about voting in individual cases.
“Investors shall disclose how they exercised their rights”
And they also have to disclose how they assign voting rights to asset managers or use the services of proxy advisors, and how the relationships are structured.
The principles also cover securities lending and taking account of client interests. Principle three states that institutional investors may not delegate their responsibility for their participation rights to third parties and that they must select their proxy advisors with “sufficient care” and ensure they are adequately supervised.
“Institutional investors must carefully consider the recommendations made by their proxy advisors with a critical eye, and in particular examine their recommendations in order to identify any potential conflicts of interest,” the guidance says.
The group joined forces in summer 2011 to formulate the guidelines in response to growing political pressure on institutional investors to exercise their rights in a more systematic manner.
In other news, a new set of ‘practice notes’ has been released to provide guidance on how the disclosure of how South Africa’s CRISA is being applied. “Without sufficient public disclosure, market forces do not have a sufficiently informed basis upon which to function,” it states.
Link to code