September was a significant month, with much of the UK following the US presidential debate while also hearing from the government about the ongoing challenges related to the national budget. There has been a subtle but clear warning to prepare for tougher economic times ahead. Additionally, it has come to light that a Non-Executive Director of the Post Office is under investigation for his involvement in the Post Office Horizon IT inquiry and has since resigned from the board.
Though the outlook may seem bleak, take heart in the fact that, with the right level of preparedness, strategic thinking, and careful planning, your companies can not only weather the challenges but also potentially emerge stronger. With this in mind, Ruth Odih explores the key issues currently occupying the attention of Non-Executive Directors.
FCA and UK Listing Rules
One of the significant developments in the governance world this year has been the recent reforms by the Financial Conduct Authority (FCA) to the UK Listing Rules. These changes have effectively lowered the governance standards in the UK.
According to a survey conducted by the Chartered Governance Institute UK & Ireland, 53% of respondents expect a continued net decline in listings on the London Stock Exchange (LSE) over the next five years. There is growing concern in the market that the relaxation of these rules may reduce or even eliminate existing protections for investors. Moreover, there is scepticism that these reforms will address the core issue of market access to capital.
While this presents a somewhat pessimistic outlook for the LSE, it is essential for directors to not only be fully informed about the financial structure of their companies but also to explore opportunities for accessing finance. For organisations considering a listing on the LSE, it is important to remember that, despite the current negative press, London remains one of the most attractive investment destinations globally. Thoroughly analyse the pros and cons of the compliance regime before making any decisions.
Shareholder Rights
Global concerns are growing over the erosion of shareholder rights, particularly in the US, where some directors remain in post despite failing to win majority support from shareholders. Governance changes, such as the softening of dual-class share rules in London and voting reforms in Italy, are contributing to a broader trend of diminishing shareholder influence. NEDs must remain proactive in upholding strong governance standards and be mindful of increased shareholder scrutiny, ensuring that governance practices align with shareholder expectations.
NEDs must remain proactive in upholding strong governance standards and be mindful of increased shareholder scrutiny, ensuring that governance practices align with shareholder expectations.
Evolving Governance Reforms
A survey shows that 61% of City leaders are calling for further reforms to solidify London’s reputation as a leading capital market.
Recent regulatory changes have relaxed dual-class share rules and altered shareholder voting on significant transactions, while there are ongoing demands for streamlining governance and revisiting executive pay regulations. NEDs should stay informed about evolving governance reforms and adjust board practices accordingly, particularly around executive pay and shareholder rights, to align with new regulations and investor expectations.
In a competitive corporate world where strong leadership is paramount, standing out is essential.
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