Why 'stewardship' matters

The relationship between shareholders and companies is fraught, not least by the long supply chain in investment management, with its intermediaries and fiduciaries standing in a long line between the end-investor and the company. Part of the appeal for greater transparency and commitment along that chain comes in the form of urging major institutional investors to act more like owners of companies, rather than traders in securities. The reasons for this approach are manifold, so too the objections to it. But it is an issue that arouses much passion and a fair degree of government and regulatory concern, so stewardship is not going off the agenda anytime soon. The think-tank Tomorrow's Company has produced the latest of its reports on the subject, it which it defines stewardship this way:
… the active and responsible management of entrusted resources now and in the longer term, so as to hand them on in better condition.
It continues: "It is an approach to performance and accountability which runs throughout the investment system and beyond it into the stakeholder relationships. From the simplest family business to the most complex web of investments, stewardship connects the needs, priorities and preferences of investors with the decisions of companies."

Coming alongside last year's Stewardship Code, issued by the UK Financial Reporting Council, and work in the European Union with similar aims, this report seeks to champion the idea that investment firms need to spend more on understanding the direction their investments are taking in terms of something more than price.

Source document: The Tomorrow's Company report "Why Stewardship Matters" is a 32-page pdf file.