Institutional Investor Stewardship in the UK and Malaysia: Functionally Similar, Contextually Challenged

Abstract

AbstractInstitutional investors are acknowledged as an influential force in markets worldwide. As a result of increased focus on the impact from the investing and shareholding practices of institutional investors, stewardship codes were first introduced in the UK, followed by Malaysia. This article evaluates the theory and practice of institutional investor stewardship in Malaysia through functional and contextual lenses, as juxtaposed against the more established position of stewardship in the UK. Notwithstanding an analogous legal framework for shareholder rights and the textual similarities of the UK Stewardship Code and Malaysian Code for Institutional Investors, the dominance of government-linked investment companies and government-linked companies in Malaysia results in a distinct set of issues in relation to institutional investor stewardship. This article then argues that the stewardship codes are in themselves insufficient in increasing the quality and scope of institutional investor engagement as they fail to address the underlying agency conflicts between the institutional investors and ultimate beneficiaries or clients. In learning from the UK's experience, it is important that Malaysian policymakers pay attention to the overarching structural factors and incentives driving institutional investor engagement alongside the development and take-up of the stewardship code.