Faculty of law blogs / UNIVERSITY OF OXFORD

Shareholder Stewardship: Autonomy and Sociality


Konstantinos Sergakis
Professor of Capital Markets Law and Corporate Governance at the University of Glasgow


Time to read

4 Minutes

Private and public actors have traditionally conceived, diffused and accepted shareholder stewardship as a market-driven concept.  In my latest paper, I argue that there is another constitutiveand admittedly well hiddenelement of stewardship that is more apt to fully grasp its distinctive features and to better inform market and public policy initiatives. This element, which I refer to as ‘stewardship sociality’, regards stewardship’s essence as a social norm that precedes and operates outside of any soft or hard law initiatives.

Stewardship sociality can offer insights into the dynamics developing between different stewards and elucidates stewardship’s malleable and expansive nature. The sociality of stewardship is already manifested in the pursuit of profit, underpinned by conventional social norm traits and values that conceive investors as instrumental actors. But social dynamics can also orientate stewardship towards non-financial investment objectives. Sociality may not require non-financial objectives, but it can certainly enable them.

Taking forward the sociality of stewardship, there is a concomitant facet that needs to be unearthed. Based on the emergence of stewardship as a social norm, institutional investors and asset managers acquire an autonomous existence as a class outside of any soft or hard law initiative. More precisely, interactions between members of stewardship teams within the wider operational spectrum of investment schemes, as well as between investors themselves in the market, form a multi-modal ecosystem with its own distinctive traits. Such traits dissociate themselves from both participants’ ideas and interests as the shared cultural mindset that is both sustained through ongoing interactions and binds and influences stewardship team members. This mindset is nourished, fertilised, and transformed by individual contributions while surviving in time with its own core identity.

Building upon the premises of a real entity theory of company law, I explore the social interactions within and between stewardship groups by demonstrating that their autonomous action requires a minimally coercive response from law. It is thus ‘stewardship autonomy’ that suggests that any legal reform needs to be confined in soft law instruments that purport to depict the sociality of stewardship and to promote its mission within a highly complex and constantly evolving global landscape. Semi-hard legal norms need to remain focused on disclosure obligations that are best fit to further nurture the social dynamics of stewardship, by inciting and enabling market actors to engage in multi-layered interactions with stewards in an informed fashion.

Shareholder stewardship: a transnational social norm?

The proliferation of soft law stewardship instruments at the global scale, albeit within different conceptual and aspirational frameworks, may also point to the emergence of stewardship as a transnational social norm. Borrowing elements from political science literature on international norms, I argue that stewardship embodies the key lifecycle elements of a transnational social norm and, as such, may pioneer transformative initiatives at the national, regional, and international levels.

The internalisation of stewardship is bound to evolve at a different pace across the globe but the collectivised realisation that stewardship has now become a mainstream modus operandi that safeguards investors’ navigation in a highly uncertain world is no longer a utopian scenario. The multiplication of global challenges is inevitably accelerating the adaptation of (willing or reticent) stewards to a new investment philosophy.

The sociality of stewardship becomes crucial in the ESG operational spectrum for several reasons: first, ESG is transforming stewardship’s traditional focus by shifting it from the corporate governance and investment management prerogatives towards novel objectives. Second, it has the capacity to influence market actors to opt for the compliance to a social norm when exercising stewardship (by pursuing financial and non-financial goals) instead of exclusively pursuing financial rewards (by instrumentalising stewardship as a mere market trend). Third, considering ESG’s transnational features, I argue that it is the sociality (and not the market trend) facet of stewardship that is best apt to unleash ESG investments’ potential to address global challenges via investors’ interactions and overall presence in the markets. Fourth, the transnational element of ESG resulting from such interactions will most probably have cascading normative effects on soft law instruments that will not simply include ESG elements in their provisions but might follow the UK Stewardship Code’s shifting focus on ESG as an overarching prerogative for investors.

Whether such reorientation of soft law tools will be decisive to achieve real change amongst investment strategies is a topic for further reflection; what matters is the potential for signalling such a shift, which may well result in a transformational journey across the investor community. Additionally, the instrumentalisation of stewardship by institutional investors and governments cannot of course be excluded, as it may also become a perfectly viable and cost-effective strategy to nurture an acceptable public image and maintain a reputational equilibrium without altering their self-interests.

Policy implications

The originality of the approach put forward in this study lies in the realisation of inner dynamics within the investor community that, if neglected by legislators or policy makers, risk leaving shareholder stewardship in an ‘operational limbo’ oreven worseperpetuating a monolithic vision of investment that becomes hostage of variable interpretations from legislators and policy makers. A characteristic example of such perils for the future of shareholder stewardship are the numerous US legislative anti-ESG initiatives that purport to impose a stringent operational framework upon institutional investors. Indeed, investment strategies that are not purely profit-driven are seen as problematic, with the result of pension funds and asset managers being blocked from integrating ESG factors. The polarisation of the current debate on institutional investors’ stewardship role and fiduciary duties does not only risk harming stewards and their clients/beneficiaries but also confining shareholder stewardship in a rigid and one-sided operational framework that neglects its social and autonomous dimension.

In Europe, the vision of shareholder stewardship has been less dogmatic compared to the US, in light of the different political trends, as well as the proliferation of ESG-related norms within various soft and hard law initiatives. Yet, the trend in Europe in relation to stewardship’s sociality has been somewhat unorthodox, treating stewardship predominantly as a market-driven trend that aims to ensure benefits for clients and beneficiaries. Stewardship has thus become hostage to being exclusively depicted via its market modus operandi and not in terms of its wider social norm facet, that is able to produce more knowledge, interaction, and sociality within the investment chain.

The novel approach advanced in this paper invites policy makers to reorient their activity and actor-based focus on a more holistic dimension and move away from rigid approaches, such as the anti-ESG bills in the US. The time may have come for stewardship’s autonomy and sociality to gain the prominence they deserve in the academic debate and inform policy making initiatives so that a more holistic and representative vision of stewardship can come forward.


Konstantinos Sergakis is the Professor of Corporate Governance and Capital Markets Law at the University of Glasgow, UK.


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