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UK Stewardship Code

 The UK Stewardship Code, aims to enhance the quality of engagement between asset managers 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.  The FRC does 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.

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 Code sets out a number of areas of good practice to which the FRC believes institutional investors should aspire.  It also describes steps asset owners can take to protect and enhance the value that accrues to the ultimate beneficiary.

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.

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.

Printed copies of these documents are available are available free of charge from www.frcpublications.com.

Implementation of the UK Stewardship 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.

The FRC encourages all institutional investors to publish 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.

However 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 FRC 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 stewardshipcode@frc.org.uk

Organisations wishing formally to notify the FRC that they have published a statement should email stewardshipcode@frc.org.uk.

Monitoring

Since 2011, the FRC has published an annual report on the impact and implementation of the UK Corporate Governance and Stewardship Codes. The annual reports are available below.

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 Management Association (IMA) also undertakes an annual monitoring exercise of how investors are implementing the Code. The IMA's 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.
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