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FRC seeks to improve reporting against the principles of the Stewardship Code

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14 Dec 2015

The Financial Reporting Council (FRC) has announced that it is to introduce a public tiering of signatories to the Stewardship Code (“the Code”) in July 2016 in order to improve reporting against the Code and to assist investors.

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 FRC will make public its assessment of signatories’ reporting against the Code.  Signatories will either be assessed as being:

Tier 1 - meeting reporting expectations in relation to stewardship activities. Additionally, asset managers will be asked to provide evidence of the implementation of their approach to stewardship. The FRC will look particularly at conflicts of interest disclosures, evidence of engagement and approach to resourcing and integration of stewardship; or

Tier 2 – not meeting those reporting expectations.

Before making its assessment public, the FRC will contact firms with feedback to allow time for improvements.

The press release is available on the FRC website.

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