Debtholder Stewardship

Debtholder stewardship refers to the involvement of corporate creditors in a firm's governance framework with the aim of improving corporate decision-making. This article develops the theory of debtholder stewardship by identifying the mechanisms of debtholder influence, assessing their effectiveness in modern capital markets, and outlining the implications of this analysis for investor stewardship and regulatory efforts to support it. The impetus of this study is the expansion of the UK Stewardship Code across a broader range of asset classes, stewardship activities, and topics. The code has moved away from the traditional focus on shareholders by adding investors in other assets to the list of the stewards of corporate activities. Also, the revised concept of stewardship covers broader topics, including environmental, social, and governance (ESG) factors. But our understanding of debtholder stewardship, especially on sustainability matters, is inadequate. This article explains whether corporate creditors, both public and private, can promote responsible business practices through the stewardship of borrowers.