FRC "Fundamental Review" of the Stewardship Code 2020

Author

Damian Carnell
February 28, 2024

The FRC announced a fundamental review of the UK Stewardship Code 2020 (SC 2020) on 23 February 2024, to ensure it supports growth and UK competitiveness.  

Statement: FRC policy update - launch of the UK Stewardship Code 2020 review

www.frc.org.uk/news-and-events/news/2024/02/statement-frc-policy-update-launch-of-the-uk-stewardship-code-2020-review/?utm_source=Financial+Reporting+Council&utm_campaign=dc70bc2463-EMAIL_CAMPAIGN_2024_02_27_07_03&utm_medium=email&utm_term=0_8bd7b8785d-dc70bc2463-%5BLIST_EMAIL_ID%5D

The need for a fundamental review of the SC 2020 stems from the extensive 2023 FRC consultation exercise, which resulted in the changes now seen in the UK Corporate Governance Code 2024 (CGC 2024) as published on 22 January 2024. Click here for the 2024 Code 

The FRC have also issued a summary of the principle changes to the CGC 2024, and the implementation time line which can be found here.

The FRC fundamental review of the Stewardship Code 2020 will focus mainly on:

  • Supporting creation of long term value through investor-issuer engagement, which in turn drives issuers' prospects and performance

  • Current reporting burdens on both issuers and SC 2020 signatories (see Footnote), and

  • Unintended SC 2020 consequences, such as short-term targets and outlook for issuers.

The review phases are:

  • An outreach exercise to unmask issues on these topics from:

    • Issuers (companies)

    • Asset Managers

    • Asset Owners

    • Service Providers

  • A public consultation, which will follow the 2024 AGM reporting season

  • The revised code being published in early 2025.

The FRC will co-ordinate with: 

  • The FCA, which by oversight of Asset Managers and Asset Owners supports smooth capital markets

  • The Department for Work and Pensions (DWP), and 

  • The Pensions Regulator (TPR) which supports pension member protection by helping pension plans, trustees and advisors fulfill their duties.

The current SC 2020 will continue unchanged as the review proceeds, including renewal applications from the existing signatories (see Footnote).

When the revised Stewardship Code is published, an implementation pathway will be issued by the FRC which shall allow signatories time to respond to the changes before the relevant effective dates.

CORPGRO will be issuing a Newspoint commentary on the implications of this development shortly.

Footnote on Signatories.

There are 273 current signatories to the SC 2020:188 Asset Manager, 66 Asset Owners and 19 Service Providers.

They represent £43.3 Trillion AUM spanning active and passive managers, and range from boutique firms to global asset managers. 

Two fifths (40%) of signatories are headquartered outside the UK.

CORPGRO Helps Companies With:

Please feel free to email or call:

Damian Carnell - [email protected] +44 (0) 7989 337118

VA Bec Bostock - [email protected]

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