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Stewardship survey

About the report

The Investment Association’s fifth report on adherence to the FRC’s Stewardship Code looks at the activities that support institutional investors’ commitment to the Code in practice in the year to 30 September 2014. It summarises the responses of 92 Asset Managers, 30 Asset Owners and 8 Service Providers to a questionnaire that had been developed under the direction and oversight of a Steering Group chaired by the FRC’s Director of Corporate Governance.

Main findings
  • The human resource responsible for stewardship increased by 19 per cent to reach 2,090. Over 80 per cent of this is represented by portfolio managers and analysts indicating that stewardship is integrated into the investment process.
  • Almost 90 per cent of respondents are satisfied with the outcome of their engagement and welcome companies’ responsiveness and openness to dialogue.
  • Direct contact and one-to-one meetings are considered the most effective ways of engaging with companies.
  • Collective engagement is viewed to be an essential mechanism for attaining critical mass and allowing smaller investors access to companies. However, its effectiveness can be compromised where no consensus is reached on the course of action.

The report also demonstrates that:

  • A stable proportion of respondents – 78 per cent – conduct all or some engagement in-house.
  • There is more engagement with overseas equities but less with other asset classes.
  • Fewer respondents attend AGMs as a matter of policy – 53 per cent have a policy not to attend compared to 37 per cent in 2013.
  • There is a significant increase in voting activity with 84 per cent voting all shares in UK companies.
  • Fewer respondents notify companies in advance of intention to vote against or abstain.

Practical examples

The report also looks at five case studies to assess how stewardship works in practice. The companies concerned were GlaxoSmithKline, AstraZeneca, Standard Chartered, Experian and Sports Direct. Respondents engaged on a wide range of objectives including culture, succession planning, proposed takeover, remuneration and board independence.

The in-depth analysis is set out in the separate report ‘Detailed practical examples’ and provides information on objectives, outcomes, communication with companies and how respondents voted on particular resolutions at the respective AGMs. This report also includes many quotes from respondents and for the first time comments from the companies concerned, bringing the engagement to life and demonstrating the importance of an effective dialogue.