The UK Stewardship Code

The UK Stewardship Code was published in July 2010. It aims to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities by setting out good practice on engagement with investee companies to which the FRC believes institutional investors should aspire.

 The UK Stewardship Code

Printed copies of the Code can be obtained free of charge from FRC publications, tel: 020 8247 1264, email: customer.services@cch.co.uk and online at: www.frcpublications.com.

A report summarising the actions being taken by the FRC and explaining how the Code it intended to operate was also published in July 2010.

 Implementation of the UK Stewardship Code

Organisations wishing to formally notify the FRC that they have published a statement should click here to find out how to be registered on the list of official signatories.

Please note that the page listing all signatories with links to the statements on their websites is available here.  Related documents relevant to the Stewardship Code, such as guidance produced by other organisations for their members on how to implement the Code, can be found here.

Please note there is no fee payable to become a signatory to the Stewardship Code. Where an organisation does not have a public website, the FRC can host a copy of their statement in .pdf form on the FRC website free of charge. If you wish to discuss this, please contact us via stewardshipcode@frc.org.uk.   

In December 2011 the FRC published a report on the impact and implementation of the UK Stewardship and UK Corporate Governance Codes. The report can be found at: http://www.frc.org.uk/publications/pub2672.html.

Application of the Code

The FRC sees the UK Stewardship Code as complementary to the UK Corporate Governance Code for listed companies and, like that Code, it should be applied on a “comply or explain” basis.

The Code is addressed in the first instance to firms who manage assets on behalf of institutional shareholders such as pension funds, insurance companies, investment trusts and other collective investment vehicles. The FRC expects those firms to disclose on their websites how they have applied the Code, and the FSA has announced that all UK-authorised Asset Managers will need to produce a statement of commitment to the Stewardship Code or explain why it is not appropriate to their business model from 6 December 2010. Further information can be found here. Please note that institutions that manage several types of fund need only make one statement.

However the responsibility for monitoring company performance does not rest with fund managers alone. Pension fund trustees and other owners can do so either directly or indirectly through the mandates given to fund managers. Their actions can have a significant impact on the quality and quantity of engagement with UK companies. The FRC therefore encourages all institutional investors to report if and how they have complied with the Code.

Principle 1 of the Code states that institutional investors that make use of proxy voting and other advisory services should disclose how they are used. The FRC encourages those service providers in turn to disclose how they carry out the wishes of their clients by applying the principles of the Code that are relevant to their activities.

Reporting on the Code

Disclosures made in relation to the Code will assist companies to understand the approach and expectations of their major shareholders. They will assist those issuing mandates to asset managers to make a better informed choice, assist managers to understand the expectations of currents and potential clients, and may help investors interested in collective engagement to identify like-minded institutions.

For these benefits to be realised this information needs to be readily accessible. From October 2010 the FRC will list on this website all investors that have published such a statement. The FRC will provide a link to the statements but will not comment on their contents, and inclusion on the website should not be interpreted as an endorsement by the FRC of the accuracy of the statements or the policies pursued by individual institutions.

The FRC encourages all institutional investors to publish by the end of September 2010 a statement on their website of the extent to which they have complied with the Code, and to notify the FRC when they have done so and whenever the statement is updated. The FRC also encourages each institution to name in its statement an individual who can be contacted for further information and by those interested in collective engagement.

Notifications should be sent to: stewardshipcode@frc.org.uk.