Stewardship codes encourage large institutional investors to engage more actively with the listed companies they invest in.
The first stewardship code was introduced in the United Kingdom in 2010 and around twenty other countries have now followed suit (see Table 1). In Australia, the Financial Services Council (FSC) published a stewardship standard for asset managers in July 2017 and the Australian Council of Superannuation Investors (ACSI) launched its stewardship code for asset owners this May. The ultimate purpose of these codes is to improve corporate governance and sustainable value creation. They encourage institutional investors to implement a more long-term approach to investing which involves actively monitoring investee companies and exercising shareholder rights in a responsible and transparent way. For listed companies and their directors this is likely to mean more attention from shareholders including increased participation at AGMs and heightened communication around performance, both financial performance and environmental and social performance.