Stewardship Principles OverviewSTEWARDSHIP PRINCIPLES
Nowadays, the investment chain is frequently complicated and institutional investors are having increasingly significant role in the market and the value of investee companies. “Stewardship” responsibility for an institutional investor, is when making an investment or carrying out its fiduciary duty, shall base on fund provider's (may include clients, beneficiaries or shareholders of the institutional investors) long-term interests, monitor the operation of an investee company and participate in corporate governance through attendance at shareholders' meetings, exercise of voting rights, engagement in appropriate dialogue and interact with management of the investee company.
The importance of "stewardship" has been emphasized by the majority of countries and institutional investors. The UK Financial Reporting Council (hereinafter the "FRC") published the UK Stewardship Code in 2010 as one of several measures for improvement from the 2008 financial crisis. And many other countries, including Japan,Malaysia and Hong-Kong, made their codes or principles based on the market conditions and corporate governance objectives. In observing international trends, the promotion of institutional investors' stewardship is of great importance in cultivating corporate governance in the market. G20/OECD Principles of Corporate Governance launched in 2015 have included institutional investors as a crucial component of corporate governance in Principle III, so as to enhance values for investee companies, institutional investors and beneficiaries by joining forces from within and outside of a company.
Chart : Implementation of institutional investors’ Stewardship Code/Principle
|Published by||FRC||FSA||SC & MSWG||SFC||SEC||United States Department of Labor||Financial Services Council, FSC|
|Name of the Code/Principle||UK Stewardship Code||Principle for Responsible Institutional Investors||Malaysian Code for Institutional Investors||Principles of Responsible Ownership||Dodd-Frank Act||Employee Retirement Income Security Act；ERISA||Blue Book- Corporate Governance: A Guide for Fund Managers and Corporations|
There are common characteristics among different countries’ Stewardship Code/Principle:
- Adopt "comply or explain" approach to allow flexibility.
- Require institutional investors to have clear policies on managing conflicts of interest, voting and stewardship as a whole, so that institutional investors conduct due diligence activities according to these policies.
- Encourage institutional investors to monitor, communicate and interact with investee companies to reach consensus of long-term value creation.
- Require disclosure to clients or beneficiaries about status of fulfillment of stewardship responsibilities.
Stewardship of institutional investors is becoming critical in Taiwan as their shareholdings grow dramatically. Instructed by the FSC, the Corporate Governance Center of the TWSE coordinates with the Taiwan Depository & Clearing Corporation, the Securities Investment Trust & Consulting Association and Taiwan Financial Services Roundtable, by reference to the international development experience and domestic practice, launched the “Stewardship Principles for Institutional Investors”, aiming to leverage market mechanism, along with regulations and corporate self-improvement, to enhance corporate governance quality in Taiwan.