The UK Stewardship Code
, aims to enhance the quality of engagement between investors and companies to help improve long-term risk-adjusted returns to shareholders.
Details of all signatories, with links to the statements on their websites are available here
. 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.
First published in July 2010
, the Code was revised in September 2012. Signatories were encouraged to update their policy statements after the revised Code took effect from 1 October 2012. 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 sets out a number of areas of good practice to which the FRC believes institutional investors should aspire. The FRC encourages all institutional investors to publish a statement on their website of the extent to which they have complied with the Code, 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.
Disclosures made in relation to the Code help companies understand the approach and expectations of their major shareholders. They also assist those issuing mandates to asset managers to make a better informed choice, assist managers to understand the expectations of currents and potential clients.
The responsibility for monitoring company performance does not rest with fund managers alone. Pension fund trustees and other asset-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.
The Code supports service providers to disclose how they carry out the wishes of their clients with respect to each principle of the Code that is relevant to their activities.
There is no fee payable to become a signatory to the 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 email@example.com
Since December 2010 all UK-authorised Asset Managers are required under the FCA's Conduct of Business Rules to produce a statement of commitment to the Stewardship Code or explain why it is not appropriate to their business model. Further information can be found here
. Please note that institutions that manage several types of fund need only make one statement.
Organisations wishing formally to notify the FRC that they have published a statement should email firstname.lastname@example.org
Tiering of Stewardship Code Signatories
In 2016 the FRC assessed signatories to the Stewardship Code based on the quality of their Code statements. This work was undertaken to improve the quality of reporting against the Code, encourage greater transparency in the market and maintain the credibility of the Code. Tiering distinguishes between signatories who report well and demonstrate their commitment to stewardship, and those where reporting improvements are necessary. The tiering exercise has improved the quality of reporting against the Code, promoted best practice and resulted in greater transparency in the UK market.
Asset manager signatories have been categorised in three tiers. Asset owner and service provider signatories have been categorised in two tiers. The additional tier for asset managers reflects the greater relevance of the Code’s provisions to asset managers, their role as agents and the wide range of reporting quality.
To encourage continuous improvement the FRC will continue to work with signatories to improve their reporting and those signatories who do not take steps to improve their reporting and remain in tier three will be removed from the signatory list in six months.
The FRC will continue to assess the overall quality of reporting on an annual basis, consider possible revisions to the Stewardship Code in the future and look at how it can better support international investors to meet the requirements of international Stewardship Codes.
The FRC welcomes contact from signatories who still wish to improve their reporting.
Monitoring and Developments
Since 2011, the FRC has published an annual report on the implementation of the UK Corporate Governance and Stewardship Codes and related developments. The annual reports are available below.
Developments in Corporate Governance and Stewardship 2016
Developments in Corporate Governance and Stewardship 2015
Developments in Corporate Governance and Stewardship 2014
Developments in Corporate Governance 2013
Developments in Corporate Governance 2012
Developments in Corporate Governance 2011
Separately, the Investment Association also undertakes an annual monitoring exercise of how investors are implementing the Code. The reports since 2011 are available on their website
Background to the UK Stewardship Code
In his report on the governance of banks and other financial institutions, published in November 2009, Sir David Walker recommended that the FRC’s remit should be extended to cover the development and encouragement of adherence by institutional investors to best practice in stewardship of UK listed companies; that the FRC should ratify and regularly review the Code on the Responsibilities of Institutional Investors issued by the Institutional Shareholders’ Committee (ISC); and that this Code should operate on a 'comply or explain' basis with appropriately independent monitoring.
Following a request from the then Government that the FRC take responsibility for a stewardship code, the FRC consulted in January 2010 on whether it should accept oversight of the ISC Code in its current form, or whether amendments should be made before the FRC does so. Views were also sought on which institutional investors and agents should be encouraged to apply the code, what they should be asked to disclose and to whom, and the monitoring arrangements that should be put in place.
The consultation document issued in 2010 and its responses can be viewed here
. The 2010 Code
and a report
summarising the actions taken by the FRC and explaining how the Code was intended to operate were also published in July 2010.