The UK stewardship code on shareholder engagement is set for changes this April after criticism of its apparent ineffectiveness were made in the interim findings of the Kay review.

Over 250 groups, mainly asset management firms, that have agreed to the code since it was launched two years ago are set to find the text of the document they signed changed.

Baroness Hogg, chairman of the Financial Reporting Council (FRC) told the annual conference of the International Corporate Governance Network that language is to be toughened on key issues.

These issues include managing conflicts of interest and using proxy voting, the method through which many pension funds vote at company AGMs via their asset managers.

Hogg said that the introduction to the code will be re-worded to better reflect the important of accountability in corporate governance.

The FRC are also able to extend the code to other asset classes as well as equities, and are currently consulting on changes.

Hogg was sensitive to the increased political concern on the failure of shareholders to bring underperforming or poorly managed companies to account.

She said: "The stewardship code is not available for policymakers to use in order to make backdoor legislation. We will fail the moment we succumb to pressure to politicise it."

Hogg acknowledged though that a big effort was needed to see that the stewardship code succeeds in cementing good shareholder behaviour and avoid "the real risk of returning to business as usual".

It is, says Hogg, a critical time for the stewardship code with the initiative inspiring "some change but clearly not enough." She nonetheless reckons the initiative has enjoyed a good start.

Pension funds have been criticised for not being active enough in following the principals of the code.

Hogg said at today's conference that she would like to see more institutional investors attend company annual general meetings and work together on stewardship matters.   

dbillingham@wilmington.co.uk