Stewardship Code Needs Clearer Communication Before More Regulation
Every year as the shareholder meeting season approaches, familiar scenes repeat themselves. Institutional investors explain that "the decision was made according to our principles," while companies lament that "we cannot understand what those principles are." The stewardship code was originally introduced for institutional investors to enhance corporate value as responsible shareholders and ultimately protect beneficiaries' interests. Institutional investors claim they each have their own voting guidelines, but when and how these standards are applied remains difficult to discern from the outside.
Particularly when institutional investors oppose critical agenda items from a company's perspective—such as director appointments, dividend policies, or charter amendments—the reasons given often remain abstract. Companies are left to speculate on areas for improvement and devise countermeasures based on such vague explanations. As a result, this opaque structure repeats annually, undermining the credibility of the system.
The influence of proxy advisory firms cannot be overlooked either. Recommendations from globally influential proxy advisors such as ISS and Glass Lewis function as de facto decision-making standards rather than mere reference materials. For industries with complex regulatory environments or business structures, uniform criteria cannot adequately reflect a company's substantive value. Without sufficient understanding and communication, the persuasiveness of such recommendations inevitably diminishes. While their standards are not inherently problematic, whether they sufficiently reflect domestic corporate governance or institutional realities, whether they are based on substantive research and understanding of individual companies, and whether they were formed through adequate communication with relevant stakeholders all warrant separate discussion.
Similar issues can be found in activist shareholder activities. While there is no disagreement with their goal of long-term corporate value enhancement, sometimes relatively minor issues become excessively contentious, or matters resolvable through dialogue escalate into public pressure campaigns. Such approaches can send unnecessary tension signals to the market and may instead narrow the room for constructive discussion. Therefore, efforts to distinguish between issues requiring public challenge and those adjustable through negotiation are necessary for the system's maturation.
This awareness is meaningful not for definitively judging the system's direction but for revisiting phenomena that repeatedly emerge in its operation. For the stewardship code to become firmly established, such reflection and review must continue. International examples can serve as appropriate references. The UK, Japan, Germany, and Singapore have already revised their stewardship codes to clarify the scope of institutional investor responsibilities and strengthen accountability for voting decisions and constructive engagement with companies. This can be interpreted as the result of intense deliberation that stewardship codes should not merely serve as checklists for formal compliance with principles but must function as mechanisms that faithfully evaluate companies' substantive performance and long-term value creation capabilities.
To enhance the effectiveness of the stewardship code, rather than discussing simple regulatory strengthening or expanded intervention, establishing clear accountability provisions and robust communication systems should take priority. Ultimately, what matters is not "who is right" but the question of "how consistently the current stewardship code is operating" within the trust of the market.