London, United Kingdom: ICGN has responded to the Financial Conduct Authority (FCA)’s consultation CP23/10, raising our concerns about the proposed changes and their effect on the UK’s reputation for high quality listing and governance standards.
Led by investors responsible for assets under management of $77 trillion, ICGN is an authority on global standards of corporate governance and investor stewardship. Headquartered in London, our membership is based in more than 40 countries – largely in Europe and North America, with growing representation in Asia. The ICGN Global Governance Principles and Global Stewardship Principles, written from an investor perspective, are widely used by our members in their company assessments and voting decisions, and by regulators when developing corporate governance rules.
ICGN understands the FCA’s important objective to preserve and develop the UK’s attractiveness as a global financial centre. However, we do not believe that changes to the existing listing regime would result in radical improvement – as the FCA acknowledges, “a company’s decision on both whether to list and, if so, where to list is driven by a range of factors”.
It is unclear whether the changes proposed to the listing rule would help attract listing
in the UK, but ICGN is concerned that the proposed reforms will harm the UK’s reputation as a market with robust investor protection, high corporate governance standards and a stable policy environment.
Kerrie Waring, ICGN’s Chief Executive Officer, said “The UK’s reputation for high quality listing and governance standards is both a competitive advantage and a positive differentiator for the UK market in a global context. In the quest to grow and develop further company listings, market integrity is something that must be preserved, and not diluted. We encourage the UK to maintain its advanced standards, which have inspired regulators worldwide and which investors have used as a gold standard when commenting on other markets’ listing requirements.”
At a time when the FCA is encouraging investors to play a greater, and more responsible, role in monitoring company governance and engaging with companies, the imposition of unequal voting rights has the effect of watering down investor influence. Ultimately, the proposals will expose investors to further undue risk – with potentially significant implications for underlying beneficiaries incusing pensioners and retail investors’ savings.
ICGN is concerned by the “race to the bottom” that is taking place in many markets, in which the dilution of shareholder rights is regarded by some policymakers, regulators and stock exchanges as justified to attract company listings. We believe the weakening of corporate governance standards is more likely to lower the reputation of these markets over time.
