The Stewardship Code and concept explained and criticised

What is it about?

In this article I seek to demonstrate that, as drafted, the UK Stewardship Code (SC) is trivial, absent of meaning and incapable of achieving its goals. I will begin by demonstrating how little it has achieved to date and can expect to achieve going forward. In doing so I will reconsider arguments, advanced elsewhere, concerning the conceptual problems with the SC, specifically; how it is drafted and upon what it focuses. I will then advance new concerns about the practical issues of the SC that make it a blunt tool of corporate governance but go on to show that there are a number of potential ways to change this. In doing so I hope to provide the impetus to divert the SC from its current path, travelling along the road to nowhere, and instead seek a journey that not only has a destination but a much more promising one.

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Why is it important?

Section A provides a brief introduction to the context of UK corporate governance. Section B describes the particular circumstances surrounding the ‘birth’ of the SC, the problem it was trying to fix and an analysis of how (un)successful it has been. Section C analyses why and how the SC failed to meet expectations and become a meaningful corporate governance mechanism. It provides a detailed account of the SC’s ‘structural’ weaknesses by focusing on two major and familiar arguments: (i) that, in rushing the drafting of the SC, depth and rigour were sacrificed for speediness and the need to produce a quick ‘fix’; and (ii) that the SC detracts from the real discussion to be had by avoiding the questions which should have been asked. Section D will go on to establish the extent of the damage caused by the errors and demonstrate how the consequence is a master class in meaninglessness and ultimately a voyage with no destination. Section E draws lessons from the preceding discussion and provides some signposts for the future. Finally, section F concludes.

Perspectives