FRC Leader Announces Intended Aggressive Revision to City Stewardship Code
In an unexpected move, the Financial Reporting Council (FRC) has decided to take a sledgehammer to the UK Stewardship Code—a City rulebook that requires companies to be accountable to their shareholders. This shift is part of an aim to simplify the regulatory landscape and minimize friction between businesses and their investors.
Launched following the 2008 financial crisis, the UK Stewardship Code aimed to address growing concerns that shareholders had failed to monitor risks effectively. Signatories to the code are expected to submit annual reports detailing their stewardship practices and outcomes.
However, the code has garnered criticism for being an additional layer in the ever-growing UK regulatory burden and creating tensions between listed companies and their backers.
In an interview reported by the Sunday Times, Richard Moriarty, FRC's chief executive, shared plans to reduce the sheer volume of the reports submitted by stakeholders by up to 30%. That means a whopping one-third fewer reports under the revised code!
One noticeable change is the removal of environmental, social, and governance (ESG) issues from the stewardship definition, a shift that reverses the inclusion made in 2020. This move appears to lessen the significance of ESG within the stewardship framework's core principles[2].
The new code will also, for the first time, refer explicitly to proxy voting agencies. The FRC has defined expectations for these agencies to publish their methodologies and strategies for engagement with corporations[2][4]. The idea behind this change is to acknowledge the importance and legitimacy of proxy agencies within the investment ecosystem and promote greater transparency about their voting practices and corporate engagement strategies[2][4].
While ESG issues and proxy voting agencies see changes, the scheduled date for the new code's implementation remains January 1, 2026[1].
The proposed adjustments to the City code come amid a broader government initiative to streamline financial regulations and eliminate any red tape that may hinder economic growth. Interestingly, this transformation comes on the heels of Marcus Bokkerink, the former chairman of the Competition and Markets Authority (CMA), being fired by ministers earlier this year. This move, described as "the most overtly political regulatory intervention in recent years," underscores the government's determination to reshape the financial arena[3].
- The proposed changes to the UK Stewardship Code, effective from January 1, 2026, are part of a broader government policy-and-legislation initiative to simplify financial regulations and foster economic growth, potentially impacting various sectors of the business and finance world.
- As part of the revised UK Stewardship Code, proxy voting agencies will now be explicitly referenced, expected to publish their methodologies and strategies for engagement with corporations, thereby enhancing transparency within the general-news landscape of politics, finance, and business.
- The removal of environmental, social, and governance (ESG) issues from the stewardship definition in the revised UK Stewardship Code signifies a shift in focus, marking a general-news trend that could have long-term implications for the markets and potentially influence future policy-and-legislation related to corporate accountability and sustainability.
