The Stewardship Code is a set of principles or guidelines released in 2010 by the Financial Reporting Council directed at institutional investors who hold voting rights in United Kingdom companies. Its principal aim is to make institutional investors, who manage other people's money, be active and engage in corporate governance in the interests of their beneficiaries (the shareholders).
Contents
Preface
The Code applies to "firms who manage assets on behalf of institutional shareholders such as pension funds, insurance companies, investment trusts and other collective investment vehicles." This means fund managers, but the Code also "strongly encourages" institutional investors to disclose their own level of compliance with the code's principles.
The Code adopts the same "comply or explain" approach used in the UK Corporate Governance Code. This means, it does not require compliance with principles. But if fund managers and institutional investors do not comply with any of the principles set out, they must explain why they have not done so on their websites. The information is also sent to the Financial Reporting Council, which links to the information provided to it.
The compulsion to, at the very least, explain non-compliance with the Code follows from the Financial Services and Markets Act 2000 section 2(4) and the Listing Rules.
Principles
The seven principles of the code are as follows. Institutional investors should,