International Business Law (IBL) Fellows regularly meet to hear form experts in the field of financial regulation and reporting. On October 19, visiting scholar Arad Reisberg, Faculty of Laws, University College London, presented his paper, “The notion of Stewardship from a Company Law Perspective: Re-defined and Re-assessed in light of the Recent Financial Crisis?” within the context of the U.K.’s recent introduction of a Stewardship Code.
Reisberg explained that the Stewardship Code is the first of its kind for the Financial Reporting Council (FRC), the regulatory body overseeing financial companies. The Code is designed to create greater transparency around the way investors oversee the companies they own by encouraging better dialogue between shareholders and company boards. The Code “aims to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities,” he said.
Reisberg argued that the focus on stewardship was an important criterion for assessing the performance of larger shareholders, such as institutional shareholders in a company, but that major obstacles exist that challenge its efficacy, such as engagement costs and deficiencies that make genuine stewardship challenging for institutional investors. For example, he questioned how the Code would address the issue of non-U.K. investors in light of the fact that they hold nearly 40 percent of the country’s equity market. “Would they voluntarily adhere to a Stewardship Code, and, if not, how relevant or effective would the code be? Would adoption of the code result in a non-UK investor being subject to any FRC rules?” he asked.
Despite the concerns that Reisberg raised, he suggested that the Code is the most detailed attempt to give institutional and regulatory form to the belief that shareholders are part of the solution, not part of the problem, and that they have not just a right, but a duty, to engage with the companies in which they invest.”
The Center for International Business Law spearheads an exciting calendar of events throughout the academic year that spotlights current and emerging issues in international business law and policy. The schedule includes symposia and lectures, breakfast roundtables, international economic law forums, brown bag luncheons, and student-organized programs.