Responding to the FCA’s decision to create a new category within its premium listing regime to cater for sovereign-controlled companies, Stephen Martin, Director General of the Institute of Directors, said:
“The IoD is deeply disappointed that the FCA has decided to press ahead with the creation of a new premium listing category which reduces key corporate governance requirements. This decision has been made despite opposition from across the governance spectrum and without providing evidence as to the necessity for the reduction in standards. While we recognise that the regulator has taken on board some of the IoD’s concerns in relation to the election of independent directors, they do not go far enough. The IoD reiterates its recommendation that the appointment of independent directors should be ratified by a binding vote of independent shareholders, as well as by the vote of the shareholder constituency as a whole. The FCA fails to provide a convincing justification for why listing rules relating to premium category issuers should be waived or removed in cases where the issuer has a controlling sovereign shareholder. If anything, we believe that listing rules should be strengthened for this category of issuer given its distinctive governance challenges and risks.
“A premium listing should indicate to investors that the company in question is meeting the highest standards of boardroom and reporting requirements set by the listing authority. Its very name, 'premium' is given to reassure investors that the corporate form they are entrusting with their money has undertaken a commitment to these standards. By allocating this term to organisations which are not obliged to meet key requirements in relation to minority shareholder protections and independent directors, a central tenet of UK corporate governance, the FCA not only risks the market’s reputation with investors but the UK's global reputation as a leader in best practice and good governance.
“Far from being an imposition on companies, these standards should be a kitemark of the best way to do business. Good corporate governance is only a burden on companies who fail to practice it. And our continued maintenance of these standards should be viewed both as a competitive advantage and an opportunity to further disseminate best practice across the corporate world.”