The goal of this paper is to examine whether the stewardship code, which emanated in circumstances that are specific to the United Kingdom (UK), is capable of transposition to other jurisdictions that experience different corporate structures as well as legal and institutional mechanisms. It does so in the context of India, which has introduced a series of stewardship codes for different types of institutional investors. This paper cautions against the wholesale adoption of a UK-style stewardship code in India due to the specific factors that are at play in that jurisdiction, and instead calls for a sui generis approach to stewardship.
At least three reasons necessitate such a departure from the UK stewardship approach. First, while the prominence of institutional investors in the UK in the context of companies with dispersed ownership inspired the UK-style stewardship code, the roles and challenges that institutional investors experience in India in the context of concentrated shareholding are considerably different. Second, the goals of stewardship vary from the UK, where the focus is on the long-term financial sustainability of beneficiaries of institutional investors, to India, which follows a pluralistic stakeholder approach to corporate law. Third, the traditional mode in the UK of using a code-based soft law approach to implementation of stewardship is unsuitable to the Indian circumstances that steadfastly rely on mandatory rules in the form of hard law in the corporate arena.
An edited version of this paper will be published as a chapter in “Global Shareholder Stewardship: Complexities, Challenges and Possibilities” (Dionysia Katelouzou & Dan W. Puchniak eds, Cambridge University Press, forthcoming). This is part of the Global Shareholder Stewardship project. A report from the Global Shareholder Stewardship Conference held in London last year provides an excellent snapshot of developments in the field from around the world.
For more on India, two recent opinion pieces in the Business Standard by Somasekhar Sundaresan and Amit Tandon provide analyses of recent trends in shareholder stewardship in India.