Is Institutional Investor Stewardship Still Elusive?

Abstract:     

This article examines, on the fifth anniversary of the landmark UK Stewardship Code, the notable achievements and continuing challenges in the drive to encourage institutional investors to be informed and engaged owners.

The key messages are:

1. Getting institutional investors to be good owners has proved challenging, hampered in part by the failure of stewardship codes to tackle the root causes of poor shareholder stewardship.

2. Promising developments in recent years have occurred principally at the asset owner level – particularly pension and sovereign wealth funds – rather than among the ranks of for-profit asset managers.

3. Notably, some asset owners have lengthened their performance assessment and ownership timeframes, shrunk their portfolios, and contracted the chain of ownership. Meanwhile, some passive/index investment firms have begun embracing stewardship.

Note: This article is a follow up to “Why stewardship is proving elusive for institutional investors” (2010) (available at http://ssrn.com/abstract=1635662 and “How conflicts of interest thwart institutional investor stewardship” (2011) (available at http://ssrn.com/abstract=1925485).

Number of Pages in PDF File: 5

Keywords: stewardship, stewardship code, institutional investors, corporate governance

JEL Classification: G23, G28, G32, G34