FRC Urges Deeper Engagement with Stewardship Code
A greater commitment has been asked for by the UK accounting and auditing supervisory body “Financial Reporting Council” (FRC) for the stewardship code, requiring the asset managers to do more than just signing up.
The asset managers should express their commitment to adopt the stewardship code principles and must provide reasonable explanations for reporting against it. The Council disappointedly expressed that although there were improvements to some extent but most of the participants have been unsuccessful in meeting their promise for remaining committed with the code.
It was admitted by the FRC that it might take time to develop a stewardship culture. In addition, the assistance of the Investor Forum in developing a good model for engaging the UK companies collectively, was appreciated.
Asset managers should not just talk the talk but they should walk the walk. Hermes EOS director Jennifer Walmsley indicated that they tended to promote the desire of the Council for reviewing the participants. For their changed behavior, they would wish to watch them held accountable.
The improvement of the code’s endorsement is the focus of the Council for next two years, mentioned by the FRC. Areas requiring particular attention will be:
· Establishing evidence base for stewardship benefits
· Creating demand for the stewardship work through fund managers from asset managers and owners
· Monitoring compliance with the code
Mentioning specific improvements, the Council singled out the diversity reporting and reports of audit committee.
The Chairman of the Council Sir Win Bischoff indicated that the existing culture of the individual companies is the major factor on which the compliance of the code depends. The UK companies are encouraged to gain listing in London by the healthy corporate governance codes of UK.
In spite of the stewardship issues, the governance code compliance has improved by FTSE 350, reaching up to 93.5% compliance.
Improvements have also been observed in the reports of audit committee providing transparent information and fair reporting.
The Council also quoted that currently women hold 22.8% directorships and UK was on the track of hitting the target of Lord Davies having 25% women directorships in 2015.