The Stewardship Code (link to FRC website) operates on a ‘comply or explain’ basis and is aimed at institutional investors, asset owners and asset managers. It sets out good practice on engagement with investee companies, which includes monitoring companies, entering into dialogue with boards and voting at general meetings.  The aim of the Code is to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities. 

The report summaries the responses to a questionnaire by 114 (out of a total of 274) signatories to the Stewardship Code.  The respondents consisted of 82 asset managers, 27 asset owners and five service providers. 

 Key findings from the report show:

• There are an increasing number of signatories to the Stewardship Code – 274 up from 241 in 2012.
• All respondents have a public policy statement on how they discharge their stewardship responsibilities under the Stewardship Code (Code Statement) and almost two thirds refer to or include their conflicts of interest policy within their Code statement.
• The proportion of Asset Managers where “all” or “some” mandates refer to stewardship increased to 83 per-cent from 71 per-cent in 2012.  Stewardship is referred to in the mandates of all clients for 44 per-cent of respondent Asset Managers.
• That 90 per-cent of respondents reviewed their Code Statements in 2013 and 67 per-cent updated them.  These figures are up from 77 per cent and 29 per cent in 2012 respectively.
• There was a significant increase in respondents’ resource for engagement.  The headcount responsible for engagement increased to 1,703 in 2013 from 1,311 in 2012.
• There are a wide variety of ways that respondents monitor their investee companies.  34 per cent of respondents engage with all of their UK holdings whilst a number of respondents (26 per cent) prioritise engagement to those where there are “significant issues”.  The report highlights that business strategy, board leadership and board composition are the three issues respondents consider to be most important for engagement, followed by board remuneration. 
• That more respondents give advance notice when they intend to abstain or vote against a resolution (47 per cent in 2013, 35 per cent in 2012). Voting records are disclosed publicly by 66 per cent of respondents.
• That “almost all” of respondents report on their stewardship activities to clients and beneficiaries.  Over half report quarterly and reports of respondents contain details of both voting and engagement (48 per cent) or just voting (21 per cent).  Other respondents also highlighted a preference to include more details such as Environmental, Social and Governance (ESG) assessments.

Along with these results, the report also provides practical examples of how respondents engage with companies with responses ranging from areas such as remuneration, leadership and strategy and governance.

Click for (all links to IMA website):

• Press release
• IMA report ‘Adherence to the FRS’s Stewardship Code”
• IMA page with links to past reports