This chapter delves into the ongoing debate surrounding institutional investor engagement, spanning sporadic voting to strategic shareholder activism. Focusing on the stewardship role of institutional investors as shareholders, referred to as shareholder stewardship, it contextualizes this in a historical context within corporate governance. The focus is placed on micro-level shareholder stewardship – how institutional investors monitor and engage with specific companies in their portfolios – emphasizing its alignment with traditional notions of shareholder engagement. The chapter illustrates that micro-level shareholder stewardship extends beyond mere investor engagement. It involves firm-level shareholder engagement to improve long-term company performance, alongside a commitment to meeting ultimate beneficiaries’investment needs and serving public interests, such as addressing saver needs and mitigating externalities, like climate change. Furthermore, the chapter identifies hedge-fund-style activists as key players in micro-level shareholder stewardship, offering new empirical evidence on their global scale. Despite variations, a category of investors – the activist shareholder stewards – emerges from stewardship disclosures, fulfilling the stewardship role in corporate governance.

In today’s world, the transfer of laws and regulations between different legal systems is commonplace. The global spread of stewardship codes in recent years presents a promising, but yet untested, terrain to explore the diffusion of such norms. This Chapter aims to fill this gap. Employing the method of content analysis and using information from 41 stewardship codes enacted between 1991 and 2019, we systematically examine the formal diffusion of these stewardship codes. While we find support for the diffusion story of the UK as a stewardship norm exporter, especially in former British colonies in Asia, we also find evidence of diffusion from transnational initiatives, such as the EFAMA and ICGN codes, as well as regional clusters. We also show that the UK Stewardship Code of 2020 now deviates from these current models; thus, it remains to be seen how far a second round of exportation of the revised UK model into the transnational arena will follow.

The chapter analyses the market for stewardship, as it has been developing in the UK. The 2020 UK Stewardship Code more clearly than previous stewardship codes (both in the UK and elsewhere) articulates the concept of a market for stewardship. The UK Code 2020 takes into account the position of end-investors and beneficiaries. The hope is that stewardship will be delivered because those whose money is invested ask for it. We agree that stewardship does start with those who contribute the funds invested in the market. The focus on end-investors and beneficiaries is, however, not enough. By limiting the analysis to these groups, the UK government overlooks the fact that it is itself a financial contributor to the market. A study commissioned by the Competition and Markets Authority (CMA) finds, for example, that 90% of the revenue of investment consultants and fiduciary managers derives from pensions. The government contributes to pension investments through the provision of tax credit. It is a significant financial investor in the market. Tax credit also deprives end-investors and beneficiaries of a financial incentive to oversee asset owners, asset managers and other service providers. We suggest that the UK government should act as a steward in relation to its own investment and tailor tax credit to investments that are stewardship-active.

Within less than twenty years the idea of shareholder stewardship has become a global phenomenon. In 2010, the United Kingdom released the world’s first stewardship code to cure what was perceived to be the UK’s primary corporate governance malady: rationally passive institutional investors in a country characterised by a dispersed ownership structure. Today, UK-style stewardship codes exist in 20 jurisdictions, on 6 continents, and are embedded in a panoply of legal systems, shareholder markets, and corporate cultures. This introductory Chapter to the Global Shareholder Stewardship edited book explains why shareholder stewardship around the world is far more complex than the existing literature suggests and how this complexity impacts current theories and existing practices. To explain complexity, the Chapter provides a loose taxonomy of global shareholder stewardship and examines stewardship from multiple perspectives. This complexity, which has largely been overlooked in the literature, creates distinct varieties of stewardship. Based on the distinct varieties of stewardship in jurisdictions around the world, this Chapter concludes by illuminating the challenges and possibilities of global shareholder stewardship. The taxonomy also serves as a useful lens for observing the common themes and points of intersection that make the whole of this Book greater than the sum of its individual Chapters.

In this Chapter, we investigate the availability (or not) of strategies to enforce shareholder stewardship and set out a simple enforcement taxonomy based on three dimensions: the nature of the norm enforcer (self-enforcement/third-party enforcement); the nature of the enforcement mechanism (formal/informal) and the temporal dimension of enforcement (ex-ante/ex-post). We examine the enforcement of shareholder stewardship across 25 jurisdictions and find that informal enforcement by market actors is the preferred option. Looking forward, we sketch the broad contours of an optimal stewardship enforcement framework based on our taxonomy. We caution against administrative sanctions and support instead a facilitating role for (quasi-)public in two ways. First, (quasi-)public actors can facilitate stewardship enforcement via membership/adherence sanctions taking place within stewardship networks (e.g. public tiering) or informal mechanisms (e.g. reputational mechanisms and private dialogue). Secondly, where ultimate investors have suffered damages from deficient stewardship disclosure, we support the introduction of a facilitating system of civil claims that can serve both restorative-compensatory objectives and public interests. We also advance the importance of promoting enforcement by market and social actors. Our enforcement framework is not intended to be applied in a uniform fashion around the world. Rather its multi-actor, multi-modal and temporally continuous fashion can adjust to any national or supranational framework.

Stewardship codes comprise a small but important element of the institutional framework supporting a transition towards a more sustainable financial system. By encouraging investors to incorporate environmental, social and governance factors into their investment decisions, these codes can encourage longer-term financial horizons. This chapter explores both the potential of and the challenges for stewardship codes as a tool for improving the sustainability of finance through analysis of twenty-five stewardship codes. It concludes that, by supporting a progressive interpretation of the legal duties of pension fund trustees and company directors, stewardship codes can help harness the financial clout of large investors in steering business towards a more sustainable future. They have the potential to infiltrate the complex modern investment chain, extending the influence of those who think to the long term. Although each code is limited in its enforceability, together stewardship codes have an important role to play within a wider network of mutually reinforcing regulatory instruments pursuing the common goal of sustainable development and securing transparency and accountability.