PracticeAuditWatchdog urges investor activism in new code

Watchdog urges investor activism in new code

New standards aim to make investors engage with their investments

Investors could become the frontline in the battle against reckless company
behaviour, under a proposed code being proposed by the UK’s financial reporting
watchdog.

The Financial Reporting
Council
(FRC) has asked for feedback on a new Stewardship Code,
aimed at pressuring investors to take an interest in the governance of companies
they invest in.

The idea grew out of the Walker Review into corporate governance released in
the wake of the crisis, which recommended “better engagement between fund
managers acting on behalf of their clients as beneficial owners, and the boards
of investee companies”.

The code will aim to set standards of stewardship for mainstream
institutional
investors, potentially enforced using a “comply or explain” approach which has
proven effective for listed companies.

FRC chief executive
Stephen
Haddrill
has previously stated his intention to better engage with
investors in the wake of the financial crisis.

“We need to talk more to the sovereign wealth funds, we need to talk more to
other overseas investors, the US banks and so on and encourage them to take a
stronger interest in the companies that they are either owning themselves or
companies that they are owning on behalf of their customers,” he said in
December.

Further reading:

FRC
consults on Stewardship Code for Institutional Investors

Profile:
Stephen Haddrill, chief executive, Financial Reporting Council

Haddrill:
We don’t need a Big Five

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