City Stewardship Code Overhaul Planned
- The Financial Reporting Council (FRC) is set to considerably revise the UK stewardship Code, a key City code governing shareholder accountability.
- Established after the 2008 financial crisis,the stewardship Code requires signatories to report annually on their stewardship activities. However, it has faced criticism for contributing to increasing regulation.
- FRC chief executive Richard Moriarty stated the updated code should decrease the volume of reports by up to 30%.
FRC to revamp City Stewardship code, reduce Regulatory Burden
The Financial Reporting Council (FRC) is set to considerably revise the UK stewardship Code, a key City code governing shareholder accountability. The move aims to alleviate the regulatory burden on firms and improve the relationship between listed companies and their backers.
Established after the 2008 financial crisis,the stewardship Code requires signatories to report annually on their stewardship activities. However, it has faced criticism for contributing to increasing regulation.
FRC chief executive Richard Moriarty stated the updated code should decrease the volume of reports by up to 30%. He told the sunday times,”We think we can take a bit of an axe to it.”
Changes include removing environmental, social and governance (ESG) issues from the core definition of “stewardship,” a concept first introduced in 2020. There will also be a specific reference to proxy voting agencies for the first time.
moriarty said the code will outline expectations for proxy agencies “to publish their methodologies and publish their approach to dealing with and engaging with corporates.” He added, “I think it’s right that we recognize their legitimacy and importance in the ecosystem and draw them out as separate entities in the code.”
We think we can take a bit of an axe to it.
These revisions align with a broader government initiative to streamline financial regulation and reduce red tape perceived as hindering economic growth.
What’s next
The FRC’s changes to the Stewardship Code are expected to be implemented following a consultation period, with the aim of fostering more effective engagement between investors and companies.