Schroders demands debate on scrapping stewardship code

In the UK, the FTSE 100 fund manager Schroders has raised concerns over the effectiveness of the stewardship code, which was established in 2010 as a response to the banking crisis. The purpose of this voluntary code is to dictate how fund managers should engage with companies on critical issues like environmental, social, and governance policies. Recent reports indicate that the code necessitates signatories to generate extensive documentation, which, according to Schroders, often does not receive the attention it deserves from stakeholders. For instance, Schroders mentioned that its comprehensive stewardship report, spanning 122 pages, was not even accessed by visitors to its website. The stewardship code is overseen by the Financial Reporting Council, which is responsible for regulating accounting in the UK. Following a recent consultation that focused on streamlining the code, Schroders has highlighted a growing sentiment among fund managers that the existing framework may not be serving its intended purpose effectively. Many signatories appear to be overwhelmed by the requirement to create lengthy reports rather than engage in meaningful conversations regarding their investment strategies and their implications. In response to these challenges, Schroders advocates for a serious discussion on whether the stewardship code should be scrapped altogether. The context of this debate stems from heightened scrutiny over the responsibilities of shareholders and the degree to which they should influence corporate behavior. Critics argue that despite the existence of such a code, shareholders may still be failing to hold companies accountable for risky behaviors, which contributed to the financial crisis. Following this logic, Schroders' call for this taboo conversation presents an opportunity to reassess how investor oversight should be structured moving forward and whether new, more effective methods can be adopted. This situation places Schroders at a pivotal point in the ongoing conversation about corporate governance and accountability. Their stance could spark a larger movement among institutional investors to reconsider their roles and responsibilities in influencing corporate policies and behavior. The potential for reshaping the stewardship framework may lead to significant discussions around the importance of direct engagement between fund managers and companies, ultimately seeking to enhance the effectiveness of investor influence on corporate practices, particularly in the evolving landscape of environmental, social, and governance issues.