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BIS: Investor governance key focus for FRC

Progress report on Kay Review into improving long-term investor culture flags up importance of FRC's stakeholder stewardship remit

ENSURING good governance by investors is a key plank of the accounting watchdog’s remit going forward, according to Vince Cable.

The business secretary highlighted the need for the Financial Reporting Council (FRC) to focus on encouraging and monitoring signatories to the Stewardship Code. The code aims to set good practice for the investor community to improve the long-term returns for shareholders.

“We hope that this work, together with the ongoing development of the NAPF’s Stewardship Disclosure Framework, will promote more meaningful commitments to the Stewardship Code and facilitate clear choices on stewardship for pension funds and other investors,” the review stated.

Cable’s call formed part of a progress report into the Kay Review, which was launched two years ago to help build a culture of long-term equity investment. The report highlighted “good progress” with implementing the Kay Review’s three-pronged recommendations encouraging effective shareholder engagement; improving the quality of reporting and communication; and building trust-based relationships, while aligning incentives through the investment chain.

FRC CEO Stephen Haddrill welcomed the progress report. “We will work to advance the next steps outlined in the progress report and will help work towards greater long term stewardship through the implementation of the UK Stewardship Code,” said Haddrill.

The Investor Forum’s website was also launched yesterday, two years on from the Kay Review’s own launch and recommendation for a shareholder governance lobby group. The forum is headed by former Fidelity Worldwide Investment chief investment officer Simon Fraser.

“We believe that constructive engagement between investors and company boards is central to the overall UK governance framework,” the FRC’s Haddrill added.

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