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The
code sets out how asset managers should engage with companies
over how they are run to improve long-term returns to investors.
It is based on "comply or explain", meaning asset managers must
disclose when they don't apply any of its principles.
There are currently 273 signatories to the code, many based
abroad, and representing 43.3 trillion pounds ($54.90 trillion)
of assets under management,
Since the Financial Reporting Council (FRC) wrote the latest
version in 2019, it has been given a remit by government to aid
growth and competitiveness.
Britain is seeking ways to boost London's attraction a global
financial sector through listing and other reforms as Wall
Street attracts European company listings and the UK financial
sector is largely locked out of the EU since Brexit.
"It’s clear that now is an opportune moment for a fundamental
review process to ensure that the principles of the Code are
still driving the right stewardship outcomes for investors while
not unduly contributing to reporting burdens," the FRC said in a
statement.
The review will focus on whether the code has led to unintended
consequences, such as "short-termism" in targets.
After meeting with industry participants, the FRC will make
concrete proposals in the summer for public consultation, with
the revised code published in early 2025.
The Capital Markets Industry Taskforce (CMIT), an industry group
chaired by London Stock Exchange CEO Julia Hoggett, said in
November the code must be "recalibrated" to stop measuring
compliance simply by counting the number of letters written to
companies, or board resolutions opposed.
Instead, there should be "constructive dialogue" allowing
companies to set pay at globally competitive levels to end UK
executives being paid less than global peers, which is a
"deterrent to listing" in Britain, CMIT said.
Such lobbying, coupled with pressure from the business ministry,
led the FRC to ditch the bulk of its proposals to beef up its
separate corporate governance code for companies last month.
($1 = 0.7886 pounds)
(Reporting by Huw Jones; Editing by Mark Potter)
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