FRC to name and shame investors that fail stewardship duties

INVESTORS who fail to adhere to their commitment to the FRC’s stewardship code will be named and shamed from July next year, as the reporting watchdog gets tougher on compliance with its rules.

The FRC said it will introduce “public tiering” of signatories to its stewardship code to improve reporting against the principles of the code and help investors judge how well their fund manager is delivering on their commitments.

Introduced by the FRC in 2010, the code sets out a number of areas of good practice to which investors should aspire and operates on a comply or explain basis. Over the past five years the quality and quantity of stewardship has improved but not consistently and transparently.

The threat of public shaming follows complaints from the FRC in January that too many signatories fail to follow-through on their commitment to the code and that engagement had failed to take place with sufficient quality.

Under the changes, signatories will be assessed on whether they meet 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 said it will look particularly at conflicts of interest disclosures, evidence of engagement and approach to resourcing and integration of stewardship.

Before making a public assessment, the FRC will contact firms with feedback to allow time for improvements. The FRC encourages signatories to engage with this process positively and be proactive in improving their reporting of stewardship activities.

Sir Winfried Bischoff, chairman of the FRC [pictured], said: “The stewardship code has helped to raise the profile of stewardship, normalised discussions about stewardship in the investment chain and led to improvements in the quality and quantity of engagement between investors and companies. We wish to maintain momentum by ensuring that signing up to the stewardship code is a true marker of commitment.”