New Stewardship Guidance
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A group of industry experts has launched new guidance Enhancing Stewardship Dialogue which states that companies and institutional investors need to focus more on discussing strategy and long-term performance and the factors which create and destroy value.
This Good Practice Guidance provides practical advice for companies and investors on how to make stewardship and engagement work in practice.
The key principles of the guidance are that:
The guidance was drafted by our colleagues at the Institute of Chartered Secretaries and Administrators which was commissioned by the 2020 Investor Stewardship Working Party to develop a good practice guide to improve the quality of engagement activity. The Institute established a Steering Group of companies and institutional investors to develop the guidance.
Sir John Egan, Chair, Steering Group said:
The relationship between companies and their investors lies at the heart of our capitalist system. There is good evidence that a healthy relationship, based upon truth and trust, with an open two-way exchange is rewarding for the investor, and the company also benefits ... READ MORE
Editor's notes:
It is worth understanding the path of thought that lead to the development of this guidance. Here is a selection of key readings.
But how to turn stewardship from aspiration to practical reality in the everyday decisions to be taken by pension trustees, investment consultants, fund managers, and company directors? In Why Stewardship Matters Tomorrows Company offers its agenda including the steps that need to be taken by regulators and the government in order to create the conditions in which stewardship can flourish.
The report describes the complicated chain that channels savings from pension funds, insurance policies and retail financial services into investments in companies. In its accompanying Stewardship Manifesto it suggests the steps each participant can take in order to make the chain work more effectively in the interest of stewardship.
It points out that investment returns over the long term are only created in healthy companies and we need a critical mass of investment funds to provide effective stewardship over our investments in these companies to promote the right climate for wealth creation ... READ MORE
The Financial Reporting Council published The UK Stewardship Code in September 2012. Stewardship aims to provide the long term success of companies in such a way that the ultimate providers of capital also prosper. This revised Code sets out 7 key principles ... READ MORE
The 2020 Stewardship Working Party published its report 2020 Stewardship improving the quality of investor stewardship in March 2012. The challenges identified are about both the quality and the quantity of stewardship:
There is a dialogue of the deaf between many boards and investors. - Tomorrows Stewardship Page 18.
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