The UK Financial Reporting Council (FRC) is conducting a fundamental review of the UK Stewardship Code 2020 to ensure it supports growth and market competitiveness in the UK. The code was last revised in 2019.
In a statement, the FRC said: “Following feedback received during the 2023 consultation to the Corporate Governance Code, it’s clear that now is an opportune moment for a fundamental review process to ensure that the principles of the code are still driving the right stewardship outcomes for investors while not unduly contributing to reporting burdens.”
As part of the review process, the FRC is seeking views from stakeholders on whether the code, in its current format, is being used in a manner that drives better stewardship outcomes from engagement with issuers across all asset classes.
According to the statement, the review will focus on the extent to which the code:
- Supports long-term value creation through appropriate investor-issuer engagement that drives issuers’ prospects and performance;
- Creates reporting burdens on issuers as well as code signatories; and
- Has led to any unintended consequences, such as “short-termism in targets and outlook” for issuers.
The review will be undertaken in three phases. The first phase is targeted outreach to issuers, asset managers, asset owners, and service providers. The second phase is public consultation, planned to begin in the summer, after annual general meeting voting season. The third phase is publication, which the FRC statement said was expected in early 2025.
The current code will operate as usual throughout the review process, with existing signatories required to submit their renewal application to remain a signatory.
Once the revised code is updated, the FRC said, it will set out a clear implementation pathway and ensure the effective date allows current signatories sufficient time to respond to any changes.
— To comment on this article or to suggest an idea for another article, contact Steph Brown at Stephanie.Brown@aicpa-cima.com.