Stewardship Code
A set of principles defining how institutional investors should engage with companies to promote good governance.
What is Stewardship Code?
A stewardship code is a set of principles and guidelines defining how institutional investors — including asset managers, pension funds, and insurance companies — should engage with the companies in which they invest to promote sound governance, sustainable strategy, and long-term value creation. Stewardship codes typically address: monitoring investee companies, engaging constructively with boards and management, exercising voting rights responsibly, escalating concerns when engagement fails, and publicly disclosing engagement policies and voting records. The UK Stewardship Code (maintained by the Financial Reporting Council) and Japan's Stewardship Code are leading examples. In the US, the Investment Stewardship programs of BlackRock, Vanguard, and State Street serve a similar function.
Example
The UK Stewardship Code 2020 sets 12 principles across three pillars — purpose and governance of signatories, investment approach, and engagement and voting. Asset managers such as BlackRock and Legal & General Investment Management publish annual stewardship reports as signatories, detailing how they voted on key resolutions and engaged with boards on material ESG and governance risks.
Source: UK Financial Reporting Council — The UK Stewardship Code 2020