The Purpose of Investor Stewardship

Abstract

This article delves into the evolving purpose of investor stewardship, reframing it as a pivotal yet underexplored dimension of the broader corporate purpose debate. It critiques the traditional view of stewardship as merely a tool for addressing agency costs and governance failures, exposing the limitations of a shareholder-centric approach in addressing the complexities of today’s interconnected investment landscape.

Building on the concept of “enlightened stewardship”, the article reframes the role of institutional investors, advocating for a delicate balance between serving the immediate financial interests of clients and beneficiaries and addressing the wider concerns of “unseen others”, including end investors, investee companies, society, and the environment.

Through a critical analysis of the UK Stewardship Code’s evolution, the article highlights a transformative shift from narrow, micro-level shareholder engagement to a broader, outcome-focused framework that integrates systemic and sustainability concerns. It tackles the inherent tensions between fiduciary obligations and broader stakeholder interests, advancing a redefined vision of stewardship that aligns profit and long-term value creation with purpose.

Ultimately, the article envisions enlightened stewardship as a pragmatic and transformative force for fostering long-term sustainable value creation, shaping a future where financial success and societal progress are inextricably linked.