Konstantinos Sergakis (University of Bristol) has posted “The UK Stewardship Code: Bridging the Gap between Companies and Institutional Investors”, 47:1 Revue juridique Thémis de l’Université de Montreal (2013).
The abstract is as follows:
The exercise of stewardship responsibilities by institutional investors has become an important emerging and widely-debated topic, especially due to its potential to reform corporate governance culture. Its ultimate objective appears to be change in how investment is thought of and carried out, in order to optimise the functioning of financial markets and to sustain companies’ existence and investors’ portfolio value in the long term. Investors can contribute towards this objective if they engage effectively with companies and achieve a convincing level of interaction in order to express concerns about what they expect from their investments and how the investee company should be managed. The barrier that hampers this objective is the growing distance between investors and companies, which has created a gap in terms of communication, understanding and cooperation. Financial intermediation has made cooperation between these two parties more difficult, and therefore needs to be revisited.
Regulation is able to intervene indirectly to influence this ongoing relationship by requiring that investors, especially institutional ones and their asset managers, become more transparent in how they conceive their role and how they carry out their business.
In this respect, the UK Stewardship Code was introduced in 2010 and revised in 2012. It addresses these issues and aims to become a point of reference for investors in order to assist them in achieving broader and more advanced engagement with companies. This paper aims to analyse the benefits of the Code, as well as to address remaining problematic issues, which, once dealt with, will help the UK regulatory framework achieve optimal impact on the market. It will further explore the way forward in order to improve the current framework and explore new fields of research in this area. Part I will analyse and explore the current status of the Stewardship Code. Part II will analyse the shortfalls of the Code and will strive to propose future amendments. Part III will concentrate on wider market-related issues associated with the Stewardship Code, which, once resolved, will increase its effective adoption and acceptance by the market. Part IV will conclude the debate and evaluate the contribution of the Stewardship Code in improving the relationship between companies and investors.