Stewardship and Shareholder Engagement in Germany
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Stewardship and Shareholder Engagement in Germany Wolf‑Georg Ringe1,2
© The Author(s) 2020
Abstract Corporate stewardship holds great promise for the improvement of shareholder engagement and the encouragement of more responsible and long-term oriented value creation. This is particularly true since the outbreak of the global COVID19 pandemic. Many countries have long adopted a best practice code for the stewardship role of institutional investors and asset managers, but Germany has so far refused to follow that trend. This paper explores the reasons for this reluctance, as well as whether the adoption of a Stewardship Code would still make sense in the regulatory framework of Germany today. Despite the increased presence of shareholder engagement (and even activism), several reasons may be put forward for why lawmakers have refused to adopt a stewardship code. This paper argues that the main political reason for this reluctance lies in the limited geographical reach of such a code, which would primarily be restricted to the (limited) domestic fund industry and would thus be unable to prescribe any meaningful principles to foreignbased asset managers. Still, I argue that the adoption of a code in the German context may make sense, for example to define expectations and to clarify the obligations of investee companies. Most importantly, it would benefit domestic investors that are typically ‘home biased’ and thereby frequently disproportionately invested in domestic funds. Keywords Stewardship · Shareholder engagement · Institutional investors · Germany · COVID-19
* Wolf‑Georg Ringe georg.ringe@uni‑hamburg.de http://www.ile-hamburg.de 1
Professor of Law & Finance, University of Hamburg, Institute of Law & Economics, Hamburg, Germany
2
Visiting Professor, University of Oxford, Faculty of Law, Oxford, UK
123Vol.:(0123456789)
W.-G. Ringe
1 Introduction Shareholder engagement is one of the most significant issues in corporate governance today. Ever since regulators identified passive shareholders, or ‘absent owners’, as one of the key governance problems that contributed to excessive risk-taking leading up to the financial crisis, regulators have been busy designing ways to improve shareholder ‘engagement’. The goal is to promote shareholder engagement with their investee companies, and to encourage more responsible and long-term oriented value creation.1 The iconic ‘Stewardship Code’ in the UK is the most visible example of such activity. The UK Code sets forth a number of best-practice principles that institutional investors, asset managers and proxy advisors are expected to follow. It was originally adopted in 2010 by a body known as the Financial Reporting Council (FRC), and is directed at asset managers who hold voting rights in UK firms. The principal aim of the Code is to encourage institutional investors, who manage ‘other people’s money’, to pursue a more active and engaged attitude towards their investee firms’ corporate governance. The idea of releasing such a stewardship code has been followed
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