UK: the first Stewardship Code published

The Financial Reporting Council has today published the UK Stewardship Code: see here (pdf). Operating on the 'comply or explain' basis, the code contains seven principles and accompanying guidance. For example, Principle 1 provides that "Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities". The Stewardship Code accompanies the revised corporate governance code published earlier this year.

The purpose of the code, as explained in its preface, is "to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities". Further information concerning the Code and its implementation is available here (pdf). This document also explains:

... there were a number of significant issues raised by the consultation which are not addressed in the Code and which merit further consideration. These include, for example, whether institutional investors should disclose their policies on stock lending, arrangements for voting pooled funds, and the nature of the information to be disclosed on voting records. The FRC will carry out further work on these issues in advance of the monitoring exercise planned for the second half of 2011".

UK: the pre-budget report: tax, stock lending and a governance code for building societies

The chancellor delivered his pre-budget report (PBR) today and, as expected, announced the introduction of a temporary bank payroll tax of 50% on discretionary bonus payments over £ 25,000: see here for HMRC guidance and the draft legislation. The Government offered several justifications for the new tax: it was necessary until remuneration practices change as a result of corporate governance and regulatory reforms; evidence that some banks are proposing bonuses that are not consistent with a prudent approach to risk; and fairness: the tax representing a quid pro quo for taxpayer support of the banking sector. 

Of particular interest elsewhere in the report are the following announcements (at paras. 3.39 and 3.58):

The FSA has been reviewing the governance and risk management of stock lending in the market. The Government welcomes this work and will work with the FSA and market participants as necessary to help develop thinking in this area.

Following the Walker Review, and the subsequent Financial Reporting Council (FRC) consultation on the Combined Code, the Government proposes the introduction of a specific governance code for building societies and other financial mutuals. The Government will also consider the introduction of a regular independent review of building societies (and other financial mutuals) adherence to the Code".