From Responsible Saver to Stewarded Investor?

Abstract

The financial and credit crises that engulfed the world in 2008 have heralded, at both the level of individual states and from supra-national bodies such as the EU, a confusing plethora of reports and recommendations that in some jurisdictions, for example, the US, have resulted in extensive legislative intervention. In the UK, government-commissioned inquiries, parliamentary inquiries and independent reports have looked at numerous different dimensions of financial ‘life’ and the result has been a series of codes of practice that seek to inculcate behavioural change rather than create new regulatory frameworks. No stone has gone unturned in the mission to account for failed banks, banks too big to fail, perceived excessive executive compensation and the role of institutional investors. Each sector with responsibility for the financial services industry, governments and regulatory bodies have been keen to explain blame and responsibility away while asserting that each is the appropriate level at which to situate preventative regulation for the future. It is with this last segment of the account, institutional investment, and its role within the wider community of ‘savers’ that this chapter is concerned; focusing its attention on the UK. In its four sections the chapter looks at the nature of shareholding and the social and economic expectations that it carries for a variety of participating groups. It examines current patterns of share ownership and explains why these have changed so radically in the last 40 years. Finally, it turns to the recent Stewardship Code (Financial Reporting Council (FRC), 2010a) to consider whether this offers a new way forward.