24 Jun 2011

An Investigation into Stewardship: Engagement between investors and public companies

Karel Lannoo / Diego Valiante

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With substantial contributions from ECRI Managing Director Karel Lannoo and Research Fellow Diego Valiante, a new report addresses the question of stewardship (or thoughtful ownership) in the UK and the European Union, after the financial crisis. Sponsored by the CFA Institute and the FGRE Foundation for Governance Research and Education and written in cooperation with ECMI, this report considers the potential inadequacy of stewardship by the investment industry and the degree of integration of corporate governance analysis in the investment process.
It does not to suggest that there are no examples of good practice on both the corporate and investment sides, but rather that good stewardship practice is not sufficiently robust and universal. The report analyses three key impediments to stewardship, namely, the lack of direction on the part of asset owners in mandates, the costs of carrying out diligent stewardship, and the cultural and structural barriers within the investment management industry. It proposes solutions under three headings: the investment chain and fiduciary duty, shareholder engagement and the investment management practice.
 

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