Frank Curtiss (United Kingdom)
Head of Corporate Governance - Railpen Investments
UK and International Dimensions to the UK Stewardship Code
This presentation is addressed to investors and asset managers in particular.
The presentation will draw attention to how the UK Stewardship Code may soon become a regulatory requirement for UK-authorised firms to state publicly how they apply the Code on a comply or explain basis if the FSA decides to go ahead with its proposals to change its Conduct of Business Rules.
It will mention the separate but related initative on the part of the FRC as the owner of the Code, to encourage the voluntary upfront endorsement of institutional investors including those who would not be caught by the FSA's proposed rule changes eg pension funds, overseas asset managers and other foreign investors. As the FRC rightly says, the Code is unlikely to succeed if investors do not take it seriously and in the presenter's view that includes asset owners and pension funds.
The presentation will explain what Railpen has been doing on promoting the Code both internally and beyond. Railpen have now put up their own public statement on their website and have also led an initiative to raise awareness through a joint public letter from 11 UK pension funds to the FRC to indicate full support for the Code (which has attracted significant media attention). The presenter also encouraged overseas investors to do likewise and is pleased to see that the Australian Council of SuperInvestors has sent its own letter to the FRC. The presenter also encouraged Japanese investor trade bodies and US public pension funds to look at the Code.
Although the Code was drafted with the UK in mind, it is expected to apply in other markets in the same spirit. The UK is the first and consequently influential like the original Cadbury Code on Corporate Governance in 1992 and likely to spread.
Some markets are already working on their own codes eg South Africa - and the presenter is able to say a bit about what they are doing - but like many cross-border investors would hope that as codes proliferate there is some sort of mutual recognition between them or the situation will be hard to manage with different requirements across multiple jurisdictions which would be better than a one-size-fits-all approach.
The UK Stewardship Code is very much intended to operate on a comply or explain basis. This works well in the UK and other jurisdictions like Australia, but less well in rules-based and legalistic markets such as the USA and some European markets.
The challenge is to show that it can work with the right mix of outright regulation and voluntary compliance whilst taking account of different approaches.