Overview

Now Sir David Walker has published his final recommendations and the Financial Reporting Council (FRC) has reported on its review of the Combined Code and it is possible to see some changes in emphasis and practise. But there is still uncertainty about how the changes will be put into practise and their effect. Although remuneration was the main focus of attention when the Walker Report was published, it deserves an article to itself and this article looks at some of the other trends and unanswered issues.

Institutional investors can play an important role improving corporate governance. However, there was considerable comment on the proposals originally put forward to encourage engagement and how these fitted with fund managers’ fiduciary duties to clients and various requirements which affect collective action. It is now proposed that the Code prepared by the Institutional Shareholders’ Committee should become a ‘Stewardship Code’. The FRC will consult on whether this can be operated efficiently before taking responsibility for it. Institutions and fund managers will need to say if they will commit to the code on a comply or explain basis. Walker recognises the challenges to effective engagement but indicates where he thinks fund managers should focus their initiatives, including strategy, performance and leadership.

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