II. Terminology

With this overview of terminology salient to assessing the Stewardship Code’s impact on shareholder engagement, it is helpful to identify first who is expected to participate in stewardship-related shareholder interventions. The 2010 Stewardship Code said very little in this regard. The preface indicated that the Code’s aim was “to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders”.Footnote ⁵ In the main body of the Code each principle began with the phrase “institutional investors”. Nevertheless, the term was left undefined.

Over time, the FRC identified in greater detail the key players in the stewardship context. The 2012 version of the Stewardship Code, in contrast with the 2010 version, offered guidance on the term “institutional investors”. According to an opening section of the 2012 Code, entitled “Application of the Code”,Footnote ⁶ the Code was “directed in the first instance to institutional investors, by which is meant asset owners and asset managers with equity holdings in UK listed companies”.Footnote ⁷ The FRC and the Financial Conduct Authority (“FCA”), which regulates financial services in the UK, elaborated further in a 2019 joint discussion paper that helped to provide the foundation for the 2020 Stewardship Code.Footnote ⁸ They treated asset owners and asset managers as the core members of what they described as “the institutional investment community”.Footnote ⁹

The FRC defined asset owners in a 2019 consultation paper on Stewardship Code revisions as “institutions responsible for investing capital on behalf of beneficiaries”.Footnote ¹⁰ Examples include, per the “Application of the Code” section of the 2012 Code, “pension funds, insurance companies, investment trusts and other collective investment vehicles”.Footnote ¹¹ Despite being investment intermediaries tasked with serving the interests of beneficiaries, as the term “asset owners” implies, they are treated in this context as owners of investment assets, such as shares of publicly traded companies.Footnote ¹² These asset owners in turn rely on asset managers, also often referred to as fund managers, who, according to the FRC’s 2019 consultation paper on Stewardship Code revisions, are “individuals or institutions that are responsible for the day-to-day management of assets”.Footnote ¹³ The FRC and the FCA, in their 2019 joint discussion paper, also deemed service providers for asset owners and asset managers such as proxy advisers and investment consultants to be part of the Stewardship Code’s institutional investment community.Footnote ¹⁴ The FRC described service providers in its 2019 consultation paper as entities that “do not manage investments directly […] but […] provide services that allow clients to deliver quality stewardship”.Footnote ¹⁵

As for “stewardship”, there are numerous potential conceptions,Footnote ¹⁶ and with the Stewardship Code the term’s meaning has evolved over time.Footnote ¹⁷ The 2010 Stewardship Code did not define stewardship.Footnote ¹⁸ The 2012 version did not do so either, but introductory material in the Code said the focal point was stewardship of assets by investors rather than the stewardship of a company by its directors.Footnote ¹⁹ The introductory material also indicated that under the 2012 Stewardship Code stewardship was “more than just voting”,Footnote ²⁰ referring in this context to rights shareholders of a company have to vote on prescribed matters affecting them. As to what stewardship involved in addition to voting shares, the introductory material referred to “monitoring and engaging with companies on matters such as strategy, performance, risk, capital structure, and corporate governance, including culture and remuneration”.Footnote ²¹ The introductory material in the 2012 Code also picked up on what “engaging” meant in this context, defining engagement as “purposeful dialogue with companies on those matters as well as on issues that are the immediate subject of votes at (shareholder) general meetings”.Footnote ²²

While neither the 2010 or 2012 Stewardship Codes offered an explicit definition of stewardship, the chair of the FRC did so in a 2014 essay, saying that stewardship was “how companies engage with their shareholders” when remarking the topic was “particularly close to my heart”.Footnote ²³ The FRC and FCA’s joint 2019 discussion paper offered a more elaborate description, saying “[w]e define stewardship as the responsible allocation and management of capital across the institutional investment community, to create sustainable value for beneficiaries, the economy and society”.Footnote ²⁴ This qualifies as the first “official” definition of stewardship, with the FRC using the same formulation in introductory material in the 2020 version of the Stewardship Code.Footnote ²⁵

The definition of stewardship in the 2020 Code signalled that, for Code purposes, stewardship extended well beyond the involvement of shareholders in the affairs of publicly traded companies. For instance, the 2020 Code’s definition referred generally to “allocation and management” of funds rather than specifically to engagement with the companies in which shares are held, with one implication of the reference to “allocation” being that exit from a company may be a preferred strategy instead of engagement.Footnote ²⁶ Also, the use of the term “capital” signified that assets other than public company shares could be involved. Similarly, the reference to the economy and society extended the reach of “stewardship” well beyond the affairs of publicly traded companies, even prompting speculation that with the 2020 Stewardship Code there had been a switch of emphasis “From Saving the Company to Saving the Planet”.Footnote ²⁷

With the 2026 Code, the Code’s introduction defines stewardship.Footnote ²⁸ The formulation is somewhat more concise than the 2020 version because an explicit link between stewardship and creating value for the economy and society is missing. The FRC’s rationale for the change was that the omission would make it clear that Code signatories were not obliged to deliver such wider benefits. Instead, it was “for each signatory to determine their specific investment objectives”.Footnote ²⁹ A backlash against the promotion of environmental, social and governance (“ESG”) considerations by institutional shareholders may well have played a role here.

US institutional investors are, due to substantial share ownership,Footnote ³⁰ crucial players in Britain’s institutional investment community. Recently there has been an anti-ESG movement led by US states that have been shunning asset managers who overtly prioritise environmental and social issues, accompanied sometimes by directives precluding state officials with investment responsibilities from considering such issues.Footnote ³¹ If the 2026 Code had persisted in explicitly linking stewardship with creating value for the economy and society, this could have put American Stewardship Code signatories engaging in “greenhushing” – taking environmental and social issues into account quietly to side-step the ESG backlash – awkwardly on the spot with the Stewardship Code disclosures they made.Footnote ³²

Even with the reduction in scope as compared with the 2020 Code, what stewardship involves under the 2026 Code extends substantially beyond what the FRC chair said in 2014,Footnote ³³ as “capital” is a broader concept than shares and as the activities the definition refers to (“investment allocation, management and oversight”)Footnote ³⁴ extend considerably further than engagement in relation to shares already owned. Our focus in this article is on the narrower conception of stewardship that was predominant in the UK during the early years of the Stewardship Code: participation of asset owners and asset managers in the affairs of publicly traded firms to improve shareholder returns.

We acknowledge in focusing on shareholder engagement with public companies that, as Iris Chiu put it as far back as 2013, stewardship can be “about a form of investment culture that promotes beneficial consequences for a wide range of constituents that would benefit from a healthy corporate sector”.Footnote ³⁵ Indeed, the Stewardship Code conceivably may only be viable in relation to stewardship that extends beyond “issuer-specific engagement”.Footnote ³⁶ Nevertheless, there is substantial and important ground to cover while focusing only on the shareholder activism element of stewardship. We correspondingly leave it to others to assess how changes made to the 2026 Stewardship Code might affect how institutional investors deal with assets other than shares of publicly quoted companies, how institutional investors will address and manage investment choices across asset classes, and how their activities might impact the economy and serve society.

III. Stewardship Code Chronology

Now that we have canvassed key stewardship-related terminology, we turn to the relevant chronology. A global financial crisis, with banks at the epicentre, side-swiped Britain in 2008. Shareholder passivity was identified as a culprit, with the charge being that institutional investors should have stepped forward to constrain free-wheeling bank executives.Footnote ³⁷ Sir David Walker, in a 2009 government-commissioned review of the corporate governance of banks, made a number of recommendations aimed generally at shareholders of publicly traded companies rather than banks specifically.Footnote ³⁸ Walker suggested, for instance, that major institutional investors should have a “duty of stewardship” as a corollary to the advantages of limited liability they enjoyed as shareholders.Footnote ³⁹

To attempt to put the stewardship notion into practice, the 2009 Walker Review endorsed work of the Institutional Shareholders’ Committee (“ISC”),Footnote ⁴⁰ an umbrella organisation encompassing trade associations representing pension funds, insurance companies and collective investment vehicles.Footnote ⁴¹ With the 2008 financial crisis serving as a catalyst, the ISC transformed an existing Statement of Principles on shareholder engagement into a Code on the Responsibilities of Institutional Investors.Footnote ⁴² This new Code set down principles of best practice concerning share ownership by institutional investors and referred to stewardship at various points in so doing.Footnote ⁴³ The Walker Review labelled the ISC Code a “Stewardship Code” and indicated that going forward the FRC should take responsibility for the document, with the Stewardship Code for institutional shareholders operating in parallel with but separate from what was then known as the Combined Code – now the UK Corporate Governance Code – for companies listed on the London Stock Exchange.Footnote ⁴⁴ The FRC agreed to take on the assignment.Footnote ⁴⁵

The FRC, in a January 2010 consultation document, confirmed it was intending to transform the ISC Code into the Stewardship Code.Footnote ⁴⁶ The FRC identified a key objective of this exercise as being enhancing the willingness of institutional investors to engage constructively with public company boards.Footnote ⁴⁷ Later the same year, the FRC promulgated the inaugural Stewardship Code, the first sentence of the preface of which said the Code aimed “to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders”.Footnote ⁴⁸ Hence, the 2010 Code “was designed to cure what was perceived to be the UK’s primary corporate governance malady: rationally passive institutional investors”.Footnote ⁴⁹

Seven principles very similar to those in the ISC Code were the focal point of the 2010 Stewardship Code.Footnote ⁵⁰ The principles, each one sentence in length, were organised around themes of intervention, conflicts of interest and reporting, with succinct supporting guidance being provided in relation to each. With the intervention theme, according to the 2010 Stewardship Code principles, institutional investors were expected to monitor the companies they invested in, to have clear policies on voting their shares, and to establish guidelines on when and how they would intervene, including with respect to escalating interventions undertaken and acting collectively with other investors.Footnote ⁵¹ As for conflicts of interest in relation to stewardship, institutional shareholders were supposed to have a robust, publicly disclosed policy on point.Footnote ⁵² Finally, with disclosure, the 2010 Code stipulated that institutional shareholders should divulge publicly their policy on discharging their stewardship responsibilities and should report periodically to their clients on their stewardship and shareholder voting activities.Footnote ⁵³

There was a theme the 2010 Stewardship Code left largely undeveloped, which was the incentives institutional investors would have to commit to complying with the Code’s principles and disclosing the extent of compliance. The 2010 Code was, on its own terms, fully voluntary.Footnote ⁵⁴ The preface did offer a potential Stewardship Code carrot for institutional investors – the FRC would “retain on its website a list of those investors that have published a statement on their compliance or otherwise with the Code”.Footnote ⁵⁵ Perhaps aware that pure voluntariness and the prospect of a notation on the FRC website might not suffice to create significant momentum in favour of generation and submission of Stewardship Code reports, the FRC requested, via the Code’s preface, that institutional investors notify the FRC when they published their reports and indicated that it would monitor regularly institutional investor take-up with the Code.Footnote ⁵⁶

The Financial Services Authority (“FSA”), the FCA’s predecessor, provided a substantial regulatory Stewardship Code nudge for asset managers operating in the UK to become signatories. In December 2010, the FSA added Rule 2.2.3 to what is now the FCA’s Conduct of Business Sourcebook,Footnote ⁵⁷ which required asset managers the FSA was regulating to disclose on their websites the nature of their commitment to the Stewardship Code or an alternative investment strategy. A UK-based asset manager needed ongoing FSA approval to avoid breaching a statutory prohibition on carrying out without proper authorisation regulated activities, which included managing assets on behalf of others.Footnote ⁵⁸ Ensuring Rule 2.2.3 would not jeopardise FSA authorisation to manage funds thus provided a strong regulatory incentive to sign up to the Stewardship Code.Footnote ⁵⁹

In 2012, the FRC issued a revised version of the Stewardship Code. The FRC said in the new version, “[t]his edition of the Code does not change the spirit of the 2010 Code”.Footnote ⁶⁰ The FRC’s “chief aim” with the 2012 Code correspondingly remained unchanged, namely fostering “a better quality of engagement between companies and investors, which will assist in delivering better company performance and thus better returns to investors”.Footnote ⁶¹ Paul Davies, a UK company law expert, has suggested that the 2012 version of the Stewardship Code, as with the 2010 Code, “could as well have been called an Engagement Code as a Stewardship Code”.Footnote ⁶²

The 2010 Stewardship Code’s seven one-sentence principles “were transferred almost completely into the revised UK (Stewardship) Code 2012”,Footnote ⁶³ which underscores the continuity between the two versions. The FRC did, however, tweak the supporting guidance for the 2012 Code’s seven stewardship principles in various ways, including adding corporate culture and executive remuneration as matters on which institutional investors would be expected to engage companies in which they owned shares.Footnote ⁶⁴ The FRC also replaced a succinct preface to the 2010 Code with introductory sections on the content, application and enforcement of the Code’s stewardship principles.Footnote ⁶⁵

One change which resulted from the expansion of the introductory material in the Stewardship Code 2012, as compared with the 2010 version, was that the Code’s principles were explicitly recognised as “the core of the Code”.Footnote ⁶⁶ Additionally there was a declaration not present in the 2010 Code that “effective stewardship” benefitted “the economy as a whole” as well as companies and investors.Footnote ⁶⁷ Also, asset managers and asset owners with equity holdings were identified explicitly as the institutional investors the Code aimed to influence, with the introductory material claiming in so doing that disclosures under the Code “should improve the functioning of the market for investment” because asset owners would “be better equipped to evaluate asset managers”.Footnote ⁶⁸ The 2012 Code’s introductory material recognised as well that “(i)nstitutional investors may choose to outsource to external service providers some of the activities associated with stewardship”, which meant the Code by extension was relevant for firms offering services as proxy advisers and investment consultants.Footnote ⁶⁹

While the 2012 Code substantially resembled the 2010 version, the 2020 Code differed markedly from its predecessors. What with the 2012 Code had been a 10-page document encompassing principles, supporting commentary and introductory material had with the 2020 Code mushroomed into a 32-page effort. The addition of a distinct set of six stewardship principles for service providers with supporting commentary was one source of growth.Footnote ⁷⁰ Another was that a dozen principles replaced the seven principles for institutional investors that were at the heart of the 2010 and 2012 Stewardship Codes.Footnote ⁷¹ As was the case with the 2010 and 2012 Codes, each of the principles was a single sentence in length. However, taking supporting commentary into account, together with the principles for institutional investors, the word count relating to those principles nearly doubled from 1,264 to 2,422.

The addition of new themes was a key reason for the growth in the number of Stewardship Code principles applicable to institutional investors. Again, the 2010 and 2012 Stewardship Code principles dealt primarily with shareholder engagement.Footnote ⁷² Matters were different with the 2020 Code.

With aspects of the 2020 Stewardship Code relating to institutional investors, Principles 9 to 11 focused on engagement in the same manner as the 2010 and 2012 Codes, including identifying the basic approach for institutional investors to take and flagging up the possibilities of escalation and collaboration.Footnote ⁷³ Principle 12 was in a similar vein. It implored asset owners and asset managers “to exercise their rights and responsibilities”, and supporting commentary specifically referenced what should be done with listed equity assets.Footnote ⁷⁴

In contrast with Principles 9 to 12, the remainder of the 2020 Code principles applicable to institutional investors did not focus on the shareholder engagement theme that monopolised the 2010 and 2012 Codes. The operative theme with Principles 1 to 5 was “purpose and governance”, with the focus being on the purpose and governance of asset owners and asset managers rather than on the governance of the publicly traded companies with which asset owners and asset managers might potentially engage.Footnote ⁷⁵ As for Principles 6 to 8, these addressed the investment approach of asset owners and asset managers, but said nothing about shareholder interventions in publicly traded companies. Principle 7 did indicate that Code signatories should integrate their approach to stewardship and investment but referred to “environmental, social and governance issues, and climate change” rather than engagement by shareholders.Footnote ⁷⁶

For the 2020 Code principles that did focus on shareholder engagement, there was a substantial change in approach with the supporting commentary as compared with the 2012 (and 2010) Code principles addressing the same topic. The principles in the 2012 Code sought to identify for institutional investors best practice, with the idea being that they would divulge via stewardship reports the extent to which their policies aligned with what the Code said. The 2020 Code was considerably different. Each of the 12 principles directed towards asset owners and asset managers was accompanied by an associated outcome signatories should report on.Footnote ⁷⁷ This approach was novel, with the 2010 and 2012 Codes having “focused solely on policy statements”.Footnote ⁷⁸

The Investor Forum, a group of asset owners and asset managers established in 2014 to implement a recommendation by economist John Kay in a government-commissioned 2012 review of equity markets that there be a body to facilitate collective engagement by shareholders,Footnote ⁷⁹ underscored the 2020 Code’s switch in emphasis in its report on its activities in 2019. The Investor Forum said of the 2020 Code, “the biggest change is not the growth of the document, rather it is the increased ambition for practical delivery by signatories. Gone is the former focus on statements of intent. Instead, investors must now report annually on activity, and most importantly, on outcomes”.Footnote ⁸⁰ The FRC remarked similarly in a report on early reporting under the 2020 Stewardship Code, observing that “[p]erhaps the most significant change to the Code is that signatories, in order to evidence effective stewardship, are required to annually report on the activities they undertake to fulfil their stewardship responsibilities and the outcomes of this activity”.Footnote ⁸¹ The Department for Business, Energy & Industrial Strategy (DBEIS) endorsed the 2020 Code’s outcome-oriented approach in a 2021 report on reforming audit regulation and corporate governance, saying that the 2020 Code “represents a significant shift that sets higher standards for stewardship by moving away from policy statements to focus on the reporting of activities undertaken by signatories, and their outcomes”.Footnote ⁸²

While the 2020 Stewardship Code’s approach was substantially different from that of its 2010 and 2012 counterparts, the 2026 Code is different yet again, with the treatment of principles having been simplified considerably. The change did not occur completely out of the blue. Media reports just prior to the FRC’s issuance of the 2026 Code in June 2025 indicated that the FRC was “taking an ‘axe’” to the Code.Footnote ⁸³ This followed on from the FRC declaring in a November 2024 consultation document on revising the Stewardship Code that the FRC was streamlining the Code principles “to reduce signatories’ reporting”.Footnote ⁸⁴ The intent was “to drive effective stewardship […] in a way that does not place onerous reporting burdens on signatories”.Footnote ⁸⁵

In terms of overall word count, the FRC’s Stewardship Code axe was ineffective. The 2026 Code, including all supporting material, clocks in at 4,604 words as compared with the 2020 Code’s 4,627. However, with Code principles applicable to asset owners and asset managers, together with supporting commentary, the FRC was true to its word. The number of principles was cut in half, from 12 to six.Footnote ⁸⁶ The overall word count with these principles and supporting commentary, primarily in the form of “How to Report” instructions, is just over one-third of that for the 2020 Code (2,422 vs. 816).

With the 2026 Stewardship Code, the pruning of principles applicable to asset owners and asset managers was evident with shareholder engagement as well as more generally. Only two of the six 2026 Stewardship Code principles aimed at institutional investors relate directly to shareholder activism. One of these, Principle 3, indicates merely that asset owners and asset managers who are signatories should “engage to maintain or enhance the value of assets”.Footnote ⁸⁷ As for the nature of engagement, the supporting commentary for Principle 3 does not go beyond acknowledging that it can take a variety of forms, “including directly with investee companies”, possibly “in collaboration with other investors”.Footnote ⁸⁸ Moreover, Code guidance indicates that an asset owner need not report at all on Principle 3 as a Code signatory if the asset owner outsources most of its asset management decisions.Footnote ⁸⁹

The second of the Stewardship Code 2026 principles that deals with shareholder engagement, Principle 4,Footnote ⁹⁰ offers an invocation regarding the exercising of rights and responsibilities akin to that Principle 12 of the 2020 Code put forward.Footnote ⁹¹ While the supporting commentary for Principle 4 acknowledges that the rights and responsibilities in question would “differ depending on the type of asset”, most of the “How to Report” pointers relate to listed company equities. Of these, all focus on shareholder voting.

Outcomes, a hallmark of the 2020 Code, are given “a lexical downgrading”Footnote ⁹² in the 2026 Code. With the six 2026 Stewardship Code principles aimed at institutional investors and supporting Code commentary “outcomes” are referred to only once, in the description of “How to Report” in relation to Principle 3, where signatories are instructed to provide examples of engagement.Footnote ⁹³ While the FRC, when consulting on its plans to revise the 2026 Stewardship Code, did not specifically cite trends elsewhere,Footnote ⁹⁴ the substantial downgrading of outcomes has served to bring the 2026 Stewardship Code back into alignment with overseas stewardship codes. The 2020 Code’s novel emphasis on outcomes had reinforced Britain’s status as an outlier with respect to Stewardship Code enforcement, as “stewardship codes globally […] overwhelmingly adopted the formal design and content of the UK Code 2010/2012”.Footnote ⁹⁵

Outcomes are not entirely forsaken in relation to the 2026 Code. The Code’s introductory material instead refers at length to an “Activities and Outcomes Report” a signatory is expected to submit annually to the FRC that will explain how the signatory has applied the Code’s principles over the previous year.Footnote ⁹⁶ Signatories are instructed with this report to use examples and case studies “appropriately”.Footnote ⁹⁷ A substantial reduction in disclosure expectations regarding outcomes is nevertheless involved here. Whereas under the 2026 Code referring to shareholder activism examples will suffice, guidance for Principle 9 in the 2020 Code seemingly put signatories under an onus to discuss all interventions undertaken by saying there should be disclosure of “the outcomes of engagement”.Footnote ⁹⁸ Moreover, while the 2026 Code guidance indicates that signatories are not expected to compromise confidentiality in case studies they describe,Footnote ⁹⁹ the 2020 Code lacked any equivalent concession.

Asset owners and asset managers who sign up to the 2026 Stewardship Code will have substantial material to take into account beyond what Code principles and related Code commentary say, in the form of a thorough supporting guidance document the FRC issued in October 2025.Footnote ¹⁰⁰ There is no shortage of detail here. To illustrate, the guidance on Principle 3, which again instructs asset owners and asset managers on shareholder engagement, is 1,498 words in length on its own. Nevertheless, the tenor is flexible in a way that tended not to feature with the 2020 Code, with the tone being permissive and instructive rather than prescriptive. For instance, with escalation of engagements under Principle 3 the draft guidance does not indicate to signatories whether and when escalation should occur. Instead, the guidance indicates that “[s]ignatories may decide” to escalate “if they are not satisfied with progress towards their objectives”.Footnote ¹⁰¹ Also, a substantial proportion of the draft guidance on Principle 3 is devoted to describing what constitutes a useful case study for reporting purposes rather than dictating what effective engagement might constitute.Footnote ¹⁰²

IV. The Stewardship Code’s Impact on Shareholder Engagement

What accounts for the increased detail in the 2020 version of the Stewardship Code with regard to shareholder engagement as compared with its 2010 and 2012 predecessors and the retreat with the 2026 Code? Two themes do much to explain the pattern and analysis of these provides insights regarding the extent to which the 2026 Code is likely to foster shareholder activism. One of these is the impact the Stewardship Code has had on shareholder engagement since the first version of the Code was issued in 2010. We consider this now before turning to the second theme, this being general trends concerning regulation of business, particularly in relation to publicly traded companies.

When the FRC promulgated the initial version of the Stewardship Code in 2010, the initiative was hailed as “an important step forward for corporate governance in the UK” that would make it easier for large shareholders “to act together on corporate governance matters”.Footnote ¹⁰³ Market participants and industry groups indeed were said to be “largely supportive of the ideas behind the Code”.Footnote ¹⁰⁴ Doubts, however, were also expressed regarding the extent to which the Code would displace a traditional bias in favour of passivity on the part of UK shareholders.

One source of doubt regarding the Stewardship Code 2010’s likely impact on shareholder engagement was that various widely known deterrents to activism would be difficult to dislodge. Examples cited included the resource-intensive nature of shareholder interventions, a temptation to “free ride” on the efforts of other shareholders, and the prevalence of diversification resulting in few investors having sufficient financial incentives to step forward with respect to a particular company.Footnote ¹⁰⁵ Another source of doubt was that the ISC institutional investor responsibilities code, from which the 2010 Stewardship Code principles were derived, did not impose tough and specific enough standards to elicit substantial change.Footnote ¹⁰⁶ One further doubt with the 2010 Code was that domestic shareholders were the primary target audience when foreign investors owned nearly half of the shares of UK public companies, and British pension funds and insurance companies were rapidly unwinding their UK equity holdings.Footnote ¹⁰⁷

As 2011 drew to a close, the FRC had committed itself to revising the Stewardship Code the following year.Footnote ¹⁰⁸ With it still being “early days” for the Code,Footnote ¹⁰⁹ it likely was “too early to tell how far the code has actually changed institutional investors’ behaviour”.Footnote ¹¹⁰ A survey of large quoted companies at the beginning of 2012 did indicate, however, that most respondents believed there had not been any increase in engagement in practice following the Code’s introduction.Footnote ¹¹¹ This aligned with speculation that institutional investors were treating the 2010 Stewardship Code merely as a “hygiene factor”, meaning they were becoming signatories because they anticipated this was expected of them, rather than due to any serious intent to upgrade their level of engagement.Footnote ¹¹²

Following the introduction of the 2012 version of the Stewardship Code, various observers struck an optimistic tone with regard to its impact on shareholder activism. The FRC’s chair remarked in 2014 upon “[t]he trend towards greater engagement”, and said this success was due partly “to the requirements of the Stewardship Code”.Footnote ¹¹³ Grant Thornton, in a 2014 review of corporate governance, indicated that the trend to which the FRC chair had referred was gaining momentum and said it was “stimulated by the introduction of the Stewardship Code”.Footnote ¹¹⁴ The Investment Association, a trade body representing the UK investment management industry, drew on a survey of members on stewardship to suggest in 2018 that “UK companies are increasingly willing to engage with their investors”.Footnote ¹¹⁵ In a 2018 response to a consultation on insolvency law reform, DBEIS indicated “that many UK institutional investors are already pro-active in implementing active stewardship engagement”.Footnote ¹¹⁶ The FRC itself said in 2016 “[t]he UK Stewardship Code has helped to raise the profile of stewardship, has normalised discussions about stewardship in the investment chain and has led to improvements in the quality and quantity of engagement between investors and companies”.Footnote ¹¹⁷ The FRC added in 2019 while consulting on revising the 2012 Stewardship Code, “there has been an improvement in stewardship since the Code’s introduction”.Footnote ¹¹⁸

Despite some optimistic notes being struck, the prevailing sentiment was that the 2012 Stewardship Code did not deliver with respect to shareholder engagement. The nature of the cohort of signatories was one source of concern, with this being related to UK-based asset managers having a Conduct of Business Sourcebook incentive to sign up to the Stewardship Code lacking for other institutional investors.Footnote ¹¹⁹ The House of Commons’ Business, Innovation and Skills Committee noted in a 2013 report on the 2012 Kay review of equity markets that asset manager Code signatories substantially outnumbered their asset owner counterparts and quoted evidence from a corporate governance adviser to a large UK insurance company to underscore why this mattered: “A lot of fund managers have already signed up. The disappointing bit is that the owners have not signed up. You want the owners to sign up so that the fund managers actually do the work for them.”Footnote ¹²⁰

With those institutional investors who had become 2012 Stewardship Code signatories by filing stewardship reports with the FRC, the FRC itself had serious doubts about the overall quality of the reports. The FRC noted in 2016 that, while the Stewardship Code was voluntary, those who became “signatories should be committing to adopting and reporting against the principles with appropriate explanations where needed”.Footnote ¹²¹ The FRC expressed disappointment on this front, maintaining “the reporting of too many signatories does not demonstrate that they are following through on their commitment”.Footnote ¹²² This meant “[o]verall the quality of reporting against the Code does not give a clear enough picture of the approach to stewardship”.Footnote ¹²³

The FRC responded to the concerns it raised about the quality of Stewardship Code reporting by starting to monitor and divulge publicly how signatories were doing on this front. The FRC announced at the end of 2015 that it would tier signatories, with those qualifying for Tier 1 meeting the FRC’s reporting expectations and those in Tier 2 being signatories where improvements were needed.Footnote ¹²⁴ Once the exercise commenced, the FRC added Tier 3 for signatories being put on notice that they would lose their status as Stewardship Code signatories unless their reporting improved.Footnote ¹²⁵ In 2017, the FRC abolished Tier 3 when those institutional investors that had not improved their statements to Tier 1 or Tier 2 standard exited from the signatory list.Footnote ¹²⁶

The “tiering” initiative was praised as “a step in the right direction” by some because it encouraged naming-and-shaming of perfunctory reporting.Footnote ¹²⁷ The FRC itself treated the exercise as a success, saying in early 2017, “[t]he quality of signatory statements has improved substantially as a result and we are pleased with the constructive approach taken by signatories”.Footnote ¹²⁸ The FRC added as the year drew to a close, “[t]he tiering exercise has resulted in more transparency and improved reporting against the Stewardship Code”.Footnote ¹²⁹ Ultimately, however, with the 2012 Stewardship Code getting asset owners and asset managers to disclose informatively how their policies matched up with the Code was primarily a means to an end, with that end being fostering more and better activism in relation to publicly traded companies. On this count, the evidence was substantially discouraging, with the verdict of a 2018 government-commissioned review of the FRC by Sir John Kingman being particularly damning and ultimately influential.Footnote ¹³⁰

Various commentators expressed scepticism regarding the 2012 Stewardship Code’s impact on shareholder engagement before the 2018 Kingman review. Anthony Hilton, a financial columnist, argued in 2016 that with the Stewardship Code “the results have been disappointing”.Footnote ¹³¹ A 2017 policy report by The Purposeful Company Task Force maintained that with the Stewardship Code the focus had been “on reporting quality rather than true stewardship quality”, which created “the danger of emphasising focus on visible rather than meaningful stewardship activity”.Footnote ¹³² The House of Commons’ Business, Energy and Industrial Strategy Committee discussed evidence in a 2017 report on corporate governance that the level of shareholder engagement was “extremely poor” in British public companies despite the Stewardship Code.Footnote ¹³³

Kingman, in his 2018 review, offered scathing criticism of the 2012 Stewardship Code’s impact on shareholder engagement.Footnote ¹³⁴ He said “[t]he Stewardship Code, whilst a major and well intentioned intervention, is not effective in practice”,Footnote ¹³⁵ reflecting the fact that the investment community was “not as engaged […] as it should be”.Footnote ¹³⁶ Kingman curtly dismissed the tiering initiative the FRC had hailed as a success,Footnote ¹³⁷ saying that the exercise focused “predominantly on checking the content of stewardship statements, not on actual effectiveness or outcomes”.Footnote ¹³⁸ What was needed with the Stewardship Code, according to Kingman, was “a fundamental shift in approach” to ensure the Code did not remain “simply a driver of boilerplate reporting”.Footnote ¹³⁹ Kingman said that in order for the Code to differentiate “excellence in stewardship […] [i]t should focus on outcomes and effectiveness, not on policy statements”.Footnote ¹⁴⁰ If that did not happen, Code abolition likely should follow.Footnote ¹⁴¹ As one of us suggested, “[w]hen it comes to engagement, with the publication of the UK Stewardship Code 2020 […] the FRC has kicked open the swing-doors to last chance saloon”.Footnote ¹⁴²

When the FRC consulted on revising the Stewardship Code in 2019, it optimistically suggested in the wake of the Kingman review’s withering assessment that the evidence “on whether and how stewardship is happening” was overall “mixed”.Footnote ¹⁴³ Nevertheless, with DBEIS concurring with Kingman that “the Stewardship Code must be demonstrably improved” with respect to shareholder engagement,Footnote ¹⁴⁴ the FRC fully took on board the need for a new approach. As mentioned, with the principles in the Stewardship Code 2020 dealing with shareholder engagement, these focused on outcomes in a way that was not evident with the 2010 and 2012 Codes.Footnote ¹⁴⁵ This occurred in response to the Kingman review recommendation of a switch in emphasis in favour of outcomes and effectiveness.Footnote ¹⁴⁶ The FRC acknowledged the provenance of this approach in a 2020 paper on early reporting under the 2020 Stewardship Code, saying that the Code’s “new focus on the importance of stewardship activities and outcomes recognises the need for renewed rigour in stewardship reporting called for by many, including Sir John Kingman”.Footnote ¹⁴⁷

How much difference did the shift in favour of reporting outcomes and other changes to the 2020 Code make with respect to encouraging shareholder engagement? Grant Thornton, in a review of corporate governance for 2021, said that the 2020 Code was “starting to increase the depth and breadth of shareholder engagement, reaching a new high after years of decline”.Footnote ¹⁴⁸ Otherwise, the evidence is fragmentary but indicates a lack of meaningful improvement, resonating with predictions that in relation to the “traditional premise” of issuer-specific engagement, the 2020 Code was “fundamentally fated to fail”.Footnote ¹⁴⁹ For example, in 2025, a former public company chief executive wrote in the Financial Times, “[s]hareholder engagement with public company boards has worked less well recently, as investors seem largely uninterested in behaving as proper owners”.Footnote ¹⁵⁰ The Confederation of British Industry (“CBI”), a private business lobbying organisation, complained the same year of “a free-rider problem of asset owners who don’t invest in stewardship, basically getting a free ride on those who do”.Footnote ¹⁵¹ Moreover, foreign ownership of shares of UK public companies, identified as a key reason why the Stewardship Code 2010 was unlikely to foster shareholder engagement,Footnote ¹⁵² increased substantially from 43 per cent in 2010 to nearly 59 per cent in 2024,Footnote ¹⁵³ and thus logically became a considerably more potent deterrent to activism.

One further obstacle to the Stewardship Code 2020 fostering shareholder engagement was that collective investment vehicles with explicit passive “index-tracking” mandates that observers argue are ill-suited to undertake the sort of issuer-specific engagement the Stewardship Code has sought to promote,Footnote ¹⁵⁴ had come to own a substantially larger proportion of shares of UK public companies than they did when the Code was first introduced.Footnote ¹⁵⁵ A Sunday Times columnist alluded to the implications in 2025, saying of the underperformance of “sleepy” energy giant BP, “it has been blindingly obvious for several years. In the previous era when ‘active’ fund managers were more prevalent, institutions would have held the board to account earlier and more rigorously”.Footnote ¹⁵⁶ Ultimately, then, the “fundamental shift” in approach with the Stewardship Code that Kingman asked for,Footnote ¹⁵⁷ and that the FRC delivered on with the emphasis on outcomes in the 2020 Stewardship Code, apparently did little to foster shareholder activism.

The 2020 Stewardship Code, in addition to failing to elicit a transformation on the shareholder engagement front, fostered misgivings. By 2021, complaints had begun about the “endless bureaucracy” involved with obtaining signatory status under the Code.Footnote ¹⁵⁸ The FRC itself acknowledged there was discontent, saying in 2023 that when it was revising the UK Corporate Governance Code, “we heard some concerns from stakeholders about aspects of the UK Stewardship Code”.Footnote ¹⁵⁹

The Stewardship Code concerns of which the FRC was informed apparently affected the FRC’s approach to revising the Code. In July 2024, the FRC announced it was proposing changes designed to reduce the reporting burden Stewardship Code signatories faced.Footnote ¹⁶⁰ Later that year, the FRC indicated that, in relation to the overhaul of the Code on which it was consulting, avoiding imposing onerous reporting burdens on signatories was a priority.Footnote ¹⁶¹ The scene thus had been set for the considerably truncated treatment of shareholder engagement in the 2026 Stewardship Code as compared with the 2020 Code summarised above.Footnote ¹⁶²

To this point, the substantial expansion of the treatment of shareholder engagement in the 2020 Stewardship Code has been explained largely in terms of the FRC responding to doubts about effectiveness on this front of the 2010 and 2012 Codes. As for the U-turn with the 2026 Stewardship Code, concerns about reporting burdens have been referenced. To put matters fully into context, account needs to be taken of regulatory trends affecting UK corporate governance and British business. The final substantive section of the article addresses this point.

V. Regulatory Trends

When the FRC created, via the 2020 Stewardship Code, considerably more substantial reporting expectations for prospective Code signatories regarding shareholder engagement and other aspects of stewardship,Footnote ¹⁶³ it was running with the regulatory grain. Throughout the middle and late 2010s, the default setting in the UK was increased intervention on the corporate governance front. The pattern has been the same in reverse with the 2026 Stewardship Code. The FRC, in taking a proverbial axe to this version of the Code,Footnote ¹⁶⁴ has done so in an era when reducing burdens affecting publicly traded companies and their shareholders has been prioritised. We describe these trends now so as to put into suitable context the treatment of shareholder engagement under the 2020 and 2026 Stewardship Codes.

While at the end of 2015 the FRC announced the launch of its Stewardship Code tiering initiative to foster more thorough reporting by Code signatories,Footnote ¹⁶⁵ generally with respect to stewardship and corporate governance at this point consolidation was the predominant theme. The FRC’s chair indicated when discussing developments in corporate governance in 2015, “the emphasis has been to embed the changes we have introduced”.Footnote ¹⁶⁶ The period of consolidation would be short-lived. In 2017, the FRC chair said “2016 and 2017 have been years of particular focus on corporate governance in the UK, with a great deal of scrutiny from government, businesses and the wider public”.Footnote ¹⁶⁷ This momentum was sustained through the end of the 2010s and provided a congenial setting for the substantial expansion the Stewardship Code underwent with the 2020 version.Footnote ¹⁶⁸

How was it that corporate governance was in the regulatory spotlight during the second half of the 2010s? The Times identified the key variable in a 2024 article on the regulation of business, saying “[i]t seems lost in the mists of time now […] but Theresa May came to power promising a crackdown on corporate bad behaviour”.Footnote ¹⁶⁹ When May formally launched her brief, successful campaign in July 2016 to become leader of the Conservative party, and hence prime minister, “corporate governance suddenly shot to the top of the political agenda”,Footnote ¹⁷⁰ as she “promised nothing less than to fix capitalism”.Footnote ¹⁷¹ May, after becoming prime minister, reiterated her message at the 2016 Conservative party conference “that some areas of business have lost sight of their wider responsibility to society and needed to be reminded of it”.Footnote ¹⁷² May’s pronouncements prompted speculation that Britain was beginning a new phase of a corporate governance journey that began with the Cadbury Committee issuing a corporate governance Code of Best Practice in 1992.Footnote ¹⁷³

Ministers in May’s Government, aware of deep concern in the business community about her proclamations regarding reforming capitalism, worked hard to moderate the prime minister’s stance.Footnote ¹⁷⁴ A November 2016 speech by May to the CBI that coincided with the release of a government Green Paper on corporate governance indeed signalled a retreat from legislative pledges that May had made.Footnote ¹⁷⁵ There nevertheless were promises of corporate governance-related statutory change in the manifesto the Conservative party issued before the 2017 general election that May called to try to reinforce the Conservatives’ majority in Parliament, with the manifesto rejecting “the cult of selfish individualism” and saying “we do not believe in untrammelled free markets”.Footnote ¹⁷⁶ When the Conservatives came up short of a majority, May became a prime minister “on probation”.Footnote ¹⁷⁷ The resulting loss of political authority essentially foreclosed the possibility of meaningful corporate governance-related legislative change under her Government.Footnote ¹⁷⁸

While politics ultimately sidelined substantial corporate governance-related statutory reforms in the late 2010s, intervention remained very much on the agenda. The FRC was well aware of this: its chief executive indicated in a 2017 commentary on the 2016 Green Paper that the Government’s focus on corporate governance had encouraged “open debate”, noting that “demands on the corporate governance framework are increasing and more needs to be done to improve the culture of business and hence public trust”.Footnote ¹⁷⁹ The FRC itself was lobbying for enhanced powers to fulfil its corporate governance agenda,Footnote ¹⁸⁰ with its chief executive saying “the regulatory framework is fragmented and enforcement is not fully effective”.Footnote ¹⁸¹ The FRC additionally became a focal point for delivering reforms on issues the Conservative Government had raised, but could not legislate on, due to the 2017 election having stalled corporate governance-related statutory progress. A Telegraph columnist said as 2017 was drawing to a close, “I’ve lost count of how many additional reviews, revisions and studies are heading the FRC’s way”.Footnote ¹⁸²

The Investor Forum indicated in its report on its activities in 2017 that if 2017 “was the year of Corporate Governance reviews then 2018 looks likely to be the year of Stewardship reviews”, reasoning that with the FRC having recently launched its Stewardship Code tiering initiative “there is an appetite to enhance the effectiveness of the Stewardship Code”.Footnote ¹⁸³ The Stewardship Code would indeed be put squarely on the reform agenda in 2018. This, however, was due to Sir John Kingman’s analysis of the FRC, rather than any review the FRC was asked to conduct.

Concerns about auditing, which the FRC oversees, that had been growing quietly among UK politicians came to the fore in early 2018.Footnote ¹⁸⁴ This was due to the demise of Carillion, a construction and outsourcing company that did extensive work for the Government, which collapsed with accounts on which accounting giant KPMG had signed off as auditor just months previously, that included inflated profits and unacknowledged worthless contracts.Footnote ¹⁸⁵ At parliamentary hearings that ensued, MPs were “baying for blood over the collapse of Carillion”.Footnote ¹⁸⁶ They criticised the FRC as “toothless” and “useless”.Footnote ¹⁸⁷ DBEIS accordingly commissioned the Kingman review.Footnote ¹⁸⁸

Kingman, as we have seen, criticised the Stewardship Code and influentially argued in favour of a switch in emphasis with the Code to outcomes and effectiveness in his December 2018 report.Footnote ¹⁸⁹ He also recommended replacing the FRC with a new regulator, the Audit, Reporting and Governance Authority (“ARGA”), that would have clear statutory powers and objectives and would not be an industry self-regulator for accounting and auditing in the manner the FRC has been.Footnote ¹⁹⁰ DBEIS endorsed these recommendations in principle in early 2019,Footnote ¹⁹¹ though the plan became that the FRC would be transformed into ARGA with most staff staying.Footnote ¹⁹² Over the next four years, the FRC doubled in size to almost 450 staff in anticipation of the change.Footnote ¹⁹³ Hence, when FRC staff were formulating the 2020 Stewardship Code they were doing so on behalf of a rapidly growing regulator expecting a substantial legislative boost, a context conducive to developing the much expanded and fortified Code the FRC in fact promulgated.Footnote ¹⁹⁴

In 2021 and again in 2022, the UK Government confirmed its intention to implement statutorily “ambitious plans to further strengthen the UK’s audit and corporate governance framework”,Footnote ¹⁹⁵ with replacing the FRC with ARGA being “[a]t the core of these proposals”.Footnote ¹⁹⁶ The Government, however, failed to include the audit and corporate governance reform package in the November 2023 King’s speech, which precluded implementation prior to the general election in 2024 that the Conservatives lost to Labour.Footnote ¹⁹⁷ The FRC’s chief executive acknowledged the omission in a November 2023 policy update where he indicated that the FRC was “conscious there is currently a much wider debate about business reporting requirements and burdens across the economy”.Footnote ¹⁹⁸ It was in this context that he remarked upon concerns that had been expressed about the Stewardship Code while the FRC was consulting on amending the UK Corporate Governance Code.Footnote ¹⁹⁹ As we will see now, the “wider debate” and the concerns to which the FRC’s chief executive referred set the scene for the shareholder engagement disclosure U-turn that the 2026 Stewardship Code features.

The Financial Times, reporting in January 2024 on a decision by the FRC to drop most changes it had previously proposed to bolster the UK Corporate Governance Code, said “[t]he scaling back of the new rules illustrates the clash between a years long push to improve governance following high-profile corporate failures such as Carillion […] and warnings from the City of London that excessive requirements would damage UK companies’ competitiveness”.Footnote ²⁰⁰ Evidence of the clash between pro-regulatory momentum and a backlash against regulation was visible in other respects, with the latter trend substantially influencing the development of the 2026 Stewardship Code.

As the 2020s got underway, concerns were emerging that the sun had set on the stock market in Britain.Footnote ²⁰¹ With respect to why this was occurring, survey evidence indicated it was widely believed that “burdensome listing requirements were helping to shrink capital markets in the UK”.Footnote ²⁰² There was little reason to expect, however, that the Government or regulators would be responsive. As we have just seen, there was a general late 2010s trend in favour of corporate governance regulation that set the scene for the substantial expansion of the Stewardship Code that occurred with the 2020 version.Footnote ²⁰³ Moreover, protecting the interests of “the City” – London’s financial district – did not appear to be a governmental priority. Despite awareness that the London Stock Exchange was already in danger of becoming a relative backwater, the 2012 Kay review refrained from making proposals intended to bolster the stock market and instead emphasised reforms designed to foster “trust” between companies and their shareholders.Footnote ²⁰⁴ The City’s subsequent backing of Remain in the 2016 Brexit referendum also did it no favours.Footnote ²⁰⁵

In late 2020, evidence of a backlash against regulation of publicly traded companies began to emerge. Rishi Sunak, the Chancellor of the Exchequer at that point, told Parliament that the Government wanted “[t]o boost the number of new companies that want to list here in the UK” and to make “sure that our listings regime is as competitive as it can be to make sure that we attract companies to list here in London”.Footnote ²⁰⁶ A Government-commissioned review of regulation of equity markets ensued, the recommendations of which prompted the FCA to relax various UK Listing Rule requirements in 2021.Footnote ²⁰⁷ In 2023, the FCA announced plans to scrap additional listing rule obligations, which the Economic Secretary to the Treasury, known as the City minister, hailed as an “important step” in “improving the international competitiveness of the UK as a place to list”.Footnote ²⁰⁸ The following year the FCA followed through with the most substantial overhaul of the UK Listing Rules in over three decades and hailed the resulting simplification as a platform for bolstering Britain’s equity markets.Footnote ²⁰⁹

By the time the FCA carried out its 2024 listing rule reforms, momentum in favour of reducing burdens for business had developed more generally. The Conservative Government was pushing “regulators to promote growth in an effort to breathe life into the flatlining economy, reversing a trend of tighter supervision since the 2008 financial crisis”.Footnote ²¹⁰ The City minister said in November 2023, for instance, that regulators “need to realise that if you’re regulating a market, in any area, there’s no point having the safest graveyard”.Footnote ²¹¹ In the Autumn budget statement the Chancellor of the Exchequer issued the same month, he indicated the Government believed “the best way to grow the economy is […] by creating the conditions for the private sector to thrive by removing barriers to investment and cutting taxes”.Footnote ²¹² The Chancellor of the Exchequer stated additionally that the Government had written to the FRC to update the FRC’s remit so as to make explicit its role in promoting economic growth and competitiveness.Footnote ²¹³

The newfound prioritisation of reducing burdens for business provided the context in which the FRC opted to pare back substantially the Stewardship Code’s treatment of shareholder engagement. The theme was not a novel one, and not merely because of concerns regarding the Stewardship Code that came to light in 2023 when the FRC consulted on amending the UK Corporate Governance Code.Footnote ²¹⁴ BlackRock, a US investment giant with a strong index-tracking dimension, had expressed misgivings regarding the Stewardship Code’s impact on equity markets when the FRC distributed a draft version of the 2020 Stewardship Code which incorporated the emphasis on disclosure of shareholder engagement outcomes that would subsequently feature.Footnote ²¹⁵ BlackRock said the new approach would create a “real risk” of companies shying away from listing on the stock market in the UK. This was because the 2020 Code could mean for publicly traded companies that “any attempts to engage on difficult issues with shareholders will become the next case study in those shareholders’ public disclosures”.Footnote ²¹⁶

The FRC’s response to the Government in November 2023 on the change of the FRC’s remit to promote economic growth provided a hint that a reversal of the substantial expansion of the 2020 version of the Stewardship Code was likely. The FRC’s chief executive emphasised that he was “keen to make sure our growth duty is appropriately embedded across all our work”, noting that the FRC had a fundamental review of the UK Stewardship Code on the agenda and saying that the FRC’s intention with that exercise was to foster “stewardship outcomes in a proportionate way”.Footnote ²¹⁷ The FRC followed up in late 2024 when it indicated when circulating a draft of what would become the Stewardship Code 2026 that the new version would help to support economic growth.Footnote ²¹⁸ In making this point, the FRC almost certainly would have been aware of a view in the City that the 2020 Stewardship Code had added materially to the regulatory burden on institutional investors and thus dampened demand for shares in UK companies.Footnote ²¹⁹ Given this context, and given evidence that the Stewardship Code 2020 had not markedly bolstered shareholder engagement,Footnote ²²⁰ it is unsurprising that with respect to the treatment of shareholder engagement in the Stewardship Code the FRC executed a U-turn with the 2020 and 2026 versions and took an axe to Code principles relating to the topic.