THE Financial Conduct Authority (FCA) yesterday strengthened its listing rules to protect minority shareholders in the wake of the scandals surrounding ENRC and Bumi, two companies that floated in London and became mired in controversies over corporate governance.
The new rules, which will eventually affect already listed companies with large shareholders such as Sports Direct, ABF and EasyJet, will give minority shareholders in premium listed companies additional voting rights and greater influence over key decisions.
David Lawton, the FCA’s director of markets, said: “By safeguarding minority interests from abuse by controlling shareholders, these changes will promote market integrity and empower minority shareholders to hold the companies they invest in to account.”
Some, however, are worried that the new regulations could influence companies to list in other jurisdictions, reducing London’s competitive position for attracting and retaining publicly-quoted companies.
Recently the London Stock Exchange relaxed, rather than strengthened, listing rules for technology companies to try to keep them in the UK.
Roger Barker, corporate governance director at the Institute of Directors, voiced concern: “There is nothing inherently wrong with a company being owned by a majority shareholder. Some of the world’s most successful firms – Microsoft, Amazon, Google and BMW – have large individual shareholders. It remains to be seen whether, by singling out one type of company ownership for extra rules, the FCA will discourage these companies from listing in London. This would be a poor outcome.”
And Will Pearce, corporate partner at the law firm Davis Polk said: “Traditionally, we’ve left it for the market to place a higher value on companies that have good corporate governance. With these proposals, the regulator is taking governance out of the hands of the market”.