A stewardship code is a set of principles on how institutional investors should act as shareholders
of companies in which they invest. Since the first was adopted by the Financial Reporting Council
of the United Kingdom in July 2010, a significant number of countries, including Japan, have
followed the lead of the United Kingdom in adopting their own stewardship codes. Although the
contents of these codes are not identical, they generally are non-mandatory “comply or explain”
rules urging institutional investors to engage more actively with their investee companies by
exercising their rights as shareholders.
One might find the trend of jurisdictions adopting stewardship codes unsurprising
considering the global increase in the ownership stake held by institutional investors in listed
companies, and the growing expectation that these investors will play a role in the corporate
governance of investee companies. However, if the goal of adopting stewardship codes is to
promote better corporate governance in investee companies, then this uniform approach is rather
puzzling since it is widely acknowledged that different countries have different share-ownership
structures and often face different corporate governance challenges. It may well be the case that
the true intention behind adopting a stewardship code could be highly contextual and, contingent
on jurisdiction-specific factor.