The Stewardship Code's Achilles' Heel

Many concerned about UK corporate governance have urged those who own equity in listed companies to forsake a traditional bias in favour of passivity and act as responsible, engaged ‘owners’. The recent financial crisis has given added impetus to such calls, with the notion of ‘stewardship’ taking centre stage and resulting in July 2010 with the launch of a Stewardship Code targeting UK‐based institutional investors. This paper summarises the Stewardship Code initiative and argues that, primarily due to sustained fragmentation of share ownership occurring over the past 20 years, the Code is unlikely to foster substantially greater shareholder involvement in UK corporate governance.