6 test

Question 1

Which is the ‘engagement principle’?

Answer 1

2. Engagement

Code provisions
Other than the new UK Stewardship Code, the principles of all the codes around the world are remarkably similar. Typically there are six or seven principles, with the first often requiring investors to have a public policy regarding stewardship, and the last noting the need for honest and open reporting of stewardship activities. The main body of the principles between these two usually call for:

1. regular monitoring of investee companies;
2. active engagement where relevant (sometimes termed “escalation”, or sometimes escalation is deemed worthy
   of a separate principle of its own); and
3. thoughtfully intelligent voting.

Question 2

STEWARD ORIGIN

Answer 2

derived from two Old English words (‘stig’ and ‘weard’) describing a guardian of a home – to protect the owner’s assets.

Question 3

The Walker Report

Answer 3

FIRST. What post-financial crisis report led to the creation of the first stewardship code?

On 9 February 2009 the Chancellor of the Exchequer, the Secretary of State for Business, Enterprise and Regulatory Reform and the Financial Services Secretary to the Treasury ‘announced a review to recommend measures to improve the corporate governance of UK banks, particularly with regard to risk management.’

Question 4

Kay Report 2012

Answer 4

The Government endorses ten principles for equity
markets

• Progress with the Government’s proposals to reform corporate narrative reporting2

to be higher quality, simpler, more relevant to users and more focussed on forward looking strategy – to come into force from 1 October 2013;

• A renewed commitment to secure reforms to the EU Transparency Directive which
will remove mandatory quarterly reporting;

• An updated edition of the Financial Reporting Council (FRC) Stewardship Code which emphasises that stewardship should encompass questions of company
strategy – in line with Kay’s recommendation.

The Government is also supportive of Professor Kay’s Good Practice Statements for

Company Directors, Asset Managers and Asset Holders (Annexes A – C), and believes they should prompt market participants to consider their current practice, such that
industry-led standards of good practice emerge.

Question 5

What is the most significant difference between monitoring dialogues and engagement?

Answer 5

(d) Monitoring is one-way information seeking, engagement two-way dialogue.

Question 6

Which of the following is a new area of focus in the UK Stewardship Code 2020?

Answer 6

(b) Outcomes.