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The FRC's new 'Stewardship Code' is a welcome addition to the UK's corporate governance regulatory infrastructure, says ACCA (the Association of Chartered Certified Accountants). The new Code addresses the relationship between institutional shareholders and the companies they invest in, and follows the issue in May of the updated Corporate Governance Code.

'The new Code is a constructive step in the right direction,' says Paul Moxey, ACCA's head of corporate governance and risk management. 'While institutional shareholders have immense power to influence the behaviour of UK plc, there is widespread and legitimate concern that they have not always been effective in terms of wielding that power. If they fail to exercise their shareholder powers appropriately, the risk is that they will fail to safeguard the interests not only of their investee companies but also those of their own beneficiaries.'

ACCA believes that there remains scope for making future improvements to the Code in certain respects. For example, more explanation could be given of why exactly it is in the interests of investor groups to become more involved in this area, given that shareholders do not have legal responsibilities to take part in corporate governance, only rights to do so. The renewed emphasis on principles, as opposed to compliance requirements, that is now reflected in the UK Corporate Governance Code must also be the right long-term approach for the 'Stewardship Code'. 

But ACCA agrees that the new Code is an important document and has the potential to bring about fundamental long-term improvements in the governance of UK companies. Paul Moxey wants the major investor groups to understand and accept the underlying rationale for the Code and to adopt a positive and constructive stance towards it.

'If the Code is to make the desired difference, it must be seen by investor groups not as yet another compliance exercise but as a facilitator of helpful engagement, with the goal of improving governance for the benefit of companies and all their stakeholders,' he said.