Stewardship codes ask money managers to follow the law

Our regulatory regime is based on a relatively modest degree of delegation to boards.

Our voting guidelines lists 28 items needing shareholders’ approval before managements can act. Some are understandable like permission to raise more equity (- dilutes existing shareholders), approve borrowing limits (contain risk), approve appointing and compensating the promoters’ kith and kin (how many family members are needed to change a bulb?). Others less so. These will include approving hiring and paying branch auditors, signing off on the fees paid to cost auditors, approve a company charging a fee to deliver some documents to a shareholder, or approving the extent of borrowings via non-convertible debentures, even when it is within the borrowing limits approved. It is not clear why all these need shareholder approvals.

This implies that shareholders collectively drive business, a consequence of this being that they must learn to be good stewards. They must be more demanding of information from companies, more questioning about the processes and governance structures that companies have in place and more clear-headed regarding how they vote. The buck stops with them.

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