Why Has Stewardship Become the Duty of the Shareholders?

17 October 2019

16.30 – 19.30

Eversheds Sutherland, London

Afternoon Discussion Meeting and Report - Professor George Feiger from Aston University Business School will chair the meeting which will include contributions from an expert panel.

The FRC wants shareholders to act as ‘stewards’ of companies to guard against corporate excess and sudden collapse. Let’s face it, they’ve already tried independent NED’s, RemCos, audit committees and now auditors too.

The Stewardship Code, first published in 2010, is aimed at institutional investors but marks a shift in the role and expectations of shareholders generally. Those who invest in companies are now expected to take a more active interest in their long term survival and behaviour as good corporate citizens.

But what does this form of ‘stewardship’ involve?
• Is the role of the investment manager to protect the financial position of the (underlying) asset owners or to nurture and support the good management of the companies in which they invest?
• Who are the ‘shareholders’ anyway? Just as there is a separation of ownership and control between shareholders and company managers, there is now a separation between those who own shares and those who manage them on behalf of investors.
• In 1963, individual investors owned 54% of UK firms. That figure is now around 12%. Can we really expect large organisations with diverse international portfolios to take an active interest in the governance of individual companies?

These are some of the themes which emerged from our Corporate Governance meeting in March 2018. We will now look at the question of governance from the perspective of shareholders rather than directors. With the benefit of the accompanying PARC report, we will explore the developing concept of stewardship and consider the changing nature of share ownership over recent decades. In
doing so we will examine whether and how far the various types of shareholder can reasonably be expected to meet the high standards of stewardship they have been set and what this means for companies and investors in the future.