Institutional investors are pushing back on efforts by the U.K.'s Financial Conduct Authority to make IPO listings more company friendly at the expense of shareholders.
Those changes "may be detrimental to corporate governance standards and shareholder protections" and could possibly backfire, The International Corporate Governance Network warned in a statement released Feb. 9.
ICGN's global institutional membership has a collective $77 trillion, and 77% are based outside of the U.K. Members include many of the world's largest pension funds, asset managers and advisory firms, the organization said. Statement signatories include Norges Bank Investment Management, California Public Employees' Retirement System and the California State Teachers' Retirement System.
Current U.K. corporate governance rules have been "a gold standard" for investors and inspired other regulators but that could change under final proposals released Dec. 19 by the FCA, ICGN members warned in the letter. The FCA would replace the current "premium" and "standard" listing segments with a new "commercial companies" category, and allow for multiple class share structures, including dual-class shares without mandated time-based sunset clauses.
"Investors' ability to act as responsible and effective stewards is reliant on them having strong shareholder rights and protections. We fear that this is in regression in the U.K.," the ICGN statement said.
Permitting dual class shares structures with fewer shareholder protection safeguards "will expose investors to undue risk, with potentially significant implications for underlying beneficiaries including pensioners, insurance and retail investors' savings," the letter warned.
Investors' concerns are not being heard, said Severine Neervoort, global policy director for ICGN, in a release. "At a time when regulators around the world are encouraging investors to play a greater, more responsible, stewardship role in promoting the long-term success of companies, weakening their voting rights will have the opposite effect by inhibiting investor influence."
One signatory to the statement was Railpen, London, whose senior investment manager Caroline Escott said the proposed reforms "will hinder, not help, the U.K.'s financial markets and economic recovery, to the potential detriment of members of pension schemes such as ours." Escott urged U.K. policymakers to "follow the evidence, listen to the clear concerns of both domestic and international investors, and reconsider their decision."