June 2011. 'Engagement between investors and public companies: Impediments and their resolution' addresses the question of stewardship (thoughtful ownership) in the UK and the European Union, after the financial crisis. Sponsored by the CFA Institute and the FGRE 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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About the authors
The report is authored by Charles Cronin, former Head of Standards and Financial Market Integrity EMEA at CFA Institute, and Dr. John Mellor, Founder and Executive Director of the Foundation for Governance Research and Education (FGRE). It has also benefited from the active contribution of the European Capital Markets Institute and other stakeholders:
- Karel Lannoo CEO, Centre for European Policy Studies
- Dr. Diego Valiante Research Fellow, European Capital Markets Institute
- Alan Brown Group, Chief Investment Officer, Schroder Investments Ltd
- Howard Jacobs, Trustee Director, Universities Superannuation Scheme, formerly a Partner, Slaughter and May
- David Pitt-Watson, Chairman, Hermes Focus Asset Management
- Dr. Carmine Di Noia, Deputy Director General, Head Capital Markets and Listed Companies, Assonime
About the CFA Institute
CFA is a global, not-for-profit organisation comprising the world’s largest association of investment professionals. With over 100,000 members, and regional societies around the world, we are dedicated to developing and promoting the highest educational, ethical, and professional standards in the investment industry. CFA Institute has provided financial support for this report as part of its advocacy and policy research program. This program is designed to promote thought-leadership through the exploration of current issues and debates concerning the financial services industry.
About the FGRE
The Foundation for Governance Research and Education (FGRE) is a charitable trust. FGRE’s mission, through thought leadership and education, is the development and promotion of the highest standards of effective and ethical governance in the UK and globally – for financial institutions, companies and not-for-profit entities. This mission is achieved through conducting relevant applied and interdisciplinary research and education, either singly or in collaboration with others, all of which is aimed at being of practical value.