FRC consults on stewardship code for institutional investors

The consultation on the code - proposed as part of Sir David Walker's report on corporate governance (PP Online, November 26) - will look at whether the code is suitable in its current form and what arrangements should be put in place to monitor how the code is applied.

The code's principles were originally drawn up by the Institutional Shareholders' Committee - a body which includes the National Association of Pension Funds, Association of British Insurers and the Investment Management Institute.

FRC chairman Sir Christopher Hogg said: "The benefits of a code which can help to bring about more effective engagement between companies and shareholders are potentially significant.

"They should lead to sustainable and enduring improvements in the governance and performance of UK listed companies and greater clarity in the respective responsibilities of asset managers and asset owners, which will assist the ultimate owners to hold to account those acting on their behalf."

He added: "To deliver those benefits the code must set standards of stewardship to which mainstream institutional investors should aspire, and maintain the credibility and quality of these standards. It must foster a proper sense of ownership amongst institutional investors in the interests of their clients, and its success should be based on more effective communication between shareholders and the boards of the companies in which they invest."

The FRC is seeking views on:

- Whether the code published by the ISC provides a suitable basis for the stewardship code, in either its existing or an amended form
- What the responsibilities for engagement of institutional shareholders and their agents are to the beneficial owners whose money they manage

- How adoption of the standards in the code by UK and foreign investors can be encouraged

- What information investors should disclose on their engagement policy and practice

-What arrangements should be put in place to monitor how the code is applied.

The consultation ends on April 16 and the outcome of the consultation will be announced in May or June.