UK - The Financial Reporting Council (FRC) is urging cross-border investors to highlight any potential conflicts between the proposed Stewardship Code for institutional investors and existing requirements and codes in other countries.
Following the final report from the Walker Review at the end of 2009, the FRC was asked by the UK government to accept responsibility for developing and overseeing a new Stewardship Code based on the code issued by the Institutional Shareholders' Committee (ISC) in November 2009. (See earlier IPE articles: UK governance code to target investor communication and Walker review calls for investors' stewardship code)
The FRC is now consulting on whether it should accept oversight of the code in its current form or whether amendments are needed to meet policy objectives such as high standards of stewardship; a sense of ownership by investors and improved communication between shareholders and the boards of companies they invest in.
It is proposed that the code will be operated on a ‘comply and explain' basis, however the FRC is seeking feedback to assess which institutional investors and agents should be encouraged to apply the code, what they should be asked to disclose and the monitoring arrangements that should be put in place.
The consultation stated: "The FRC would encourage all UK institutional investors to apply and report on the code, regardless of whether or not they are subject to mandatory requirements, and would welcome views on whether there are any barriers or other reasons that would prevent or discourage them from doing so."
Although foreign investors will not be required to adopt the code on a ‘comply or explain' basis, the FRC is calling for the views of overseas investors as they hope many will show their willingness to voluntarily commit to the code in relation to the holdings of UK companies.
The organisation noted the most recent ONS figures for 2006 showed foreign investors held around 40% of UK shares, and this figure is only expected to have increased. It stated: "Their ability to influence the UK companies in which they invest is potentially significant."
The closing date for the consultation is 16 April 2010 and the results are expected to be published by June.