LONDON (Reuters) - Large shareholders in Britain are bracing for rules urging more engagement with bank boards to be rolled out across all industries as calls mount for investors to shoulder more responsibility for how well companies are run.

Just days after city of London grandee David Walker outlined 39 steps to better pay and practices in a banking industry that pitched the country into recession and debt, peer Christopher Hogg will review corporate governance of all listed companies.

Hogg, who chairs the Financial Reporting Council — the guardian of good practice at listed British firms — will next Tuesday publish his review of the 'Combined Code' that governs company behaviour and policy, and open a consultation process.

Along with the government, regulators and bank executives, shareholders have borne part of the blame for not scrutinising company strategy and policy and failing to rein in excessively risky behaviour that helped sow the seeds of the credit crisis.

"The gauntlet has been thrown down to investors and it's at their own peril that they do not rise to the challenge," said Anita Skipper, corporate governance director at Aviva Investors, a large fund manager in London.

"There may be one or two things that are very specific to financial companies (in yesterday's Walker Review) but in the main, it makes sense for companies in general — and some of that will be transported to the Combined Code next week."

Walker, whose report was commissioned by and has been endorsed by the government, called on the Financial Reporting Council (FRC) to ratify a new Stewardship Code for shareholders, which outlines best practice and a commitment to scrutinise boards on strategy and policy.

The Institutional Shareholders Committee's (ISC) principles form the basis of the new code. Institutional investors will have to publicly declare whether they have signed up to it — and those falling short of expectations will be called to account on a "comply or explain" basis.

Peter Montagnon, director of investment affairs at the Association of British Insurers (ABI) said Walker's report was a "useful indicator of the way forward".

"It is very important that the overall conclusion is on the side of 'comply or explain', and against statutory regulation, on the way boards behave and how shareholders engage. We will do our best to deliver as investors," he said. But some corporate lawyers argue it is questionable whether shareholders, who need to be able to act for their own benefits to ensure the best returns possible, should owe a wider obligation to management.

"Investors might quite properly conclude that they prefer a short-term strategy, with the manager addressing underperformance by selling rather than through engagement with the board," said Stuart Pickford, financial services litigation partner at law firm Mayer Brown.

Corporate governance body PIRC (Pension Investment Research Consultants) said the report, which also demands banks disclose top salaries, elect chairmen annually and that top executives and non executive directors are focused and qualified, had merely "tinkered in the face of overwhelming fiduciary failure".