Engagement by investors should not be reserved for “intensive care” cases but involve ongoing regular dialogue with companies, and should be enforced by asset owners, according to a respected academic.
Professor Alex Edmans of London Business School was writing on the prospect of an update to the UK’s Stewardship Code and the measures necessary for asset managers to fully integrate long-term investment practices.
He argues that stewardship should move beyond being a siloed activity for a dedicated department, but instead become integrated in an asset manager’s investment strategy.
Writing in the Financial Times, Edmans also argues that stewardship should not only be the preserve of asset managers but also the responsibility of all parties in the investment chain: asset owners, investment consultants and proxy agencies.
Edmans writes: “The stakes are high. By supporting companies in their pursuit of the long term, the investment industry will generate superior long-term returns for its clients — ordinary savers.”
He also suggested that asset owners would need to be more proactive in enforcing engagement.
“Asset owners should understand that stewardship is in their long-term interest, demand it from asset managers, integrate it into their mandates, and ensure that their own fund managers are paid according to the long term.”
Edmans adds that doing so would generate a “market” for stewardship that would have more impact than “legislating” for stewardship.