- Principle 1: Investment management companies should have "a documented policy available to the public on whether, and if so how, they exercise their ownership responsibilities". It should include a statement on how conflicts of interest are handled, and what approach the firm takes to lending shares and to recalling them from borrowers at the time of shareholder votes.
- Principle 2: Investment managers "should monitor their investee companies". That means keeping tabs on the board, to make sure directors are working well and in shareholder interests. But it acknowledges that many investing firms don't want to become insiders and thus restrict their ability to trade.
- Principle 3: Investment companies "should establish clear guidelines on when and how they will intervene with investee companies to protect and enhance value". They should state in which circumstances they would actively intervene with a company and assess periodically the outcomes of doing so. "Intervention could be considered regardless of investment style," the code states.
And more. Voting is high on the agenda of the subsequent parts of the code, something that used to be difficult for investors outside the home country of the company but which European law has strived to facilitate in recent years.
It's a code. Nothing more. EFAMA's members are associations of asset management firms, not regulators. They won't be able to enforce much of anything on member, let alone the firms that choose not to belong. But EFAMA seems to hope that national regulators might use the code as the basis for more local sets of rules or guidelines.
Source document: The EFAMA code for external governance is a seven-page pdf file.
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