LONDON — London’s reputation as a centre for corporate governance could be at risk in the scramble to attract Saudi Aramco’s share offering, the Institute of Directors has warned.
The warning comes after the Financial Conduct Authority, the markets regulator, published a proposal to relax rules certain sovereign-owned companies must fulfil before they can be listed on the London Stock Exchange.
The move has been widely seen as an attempt to attract a listing of Saudi Aramco, Saudi Arabia’s state oil company.
The changes could be “interpreted as an opportunistic attempt at boosting short-term primary issuance which ignores the longer-term implications for the overall UK corporate governance regime,” said the IoD.
Stock exchanges all over the world have been competing to attract Saudi Aramco — predicted to be valued at around £1.5 trillion — which is currently deciding which financial centre to sell 5% of its shares in. However, sovereign-owned companies cannot currently be listed on the London Stock Exchange, due to the way they are governed.
The FCA’s proposal would change this, by creating a new category with fewer regulations about how a company behaves, including how controlling shareholders interact with each other and whether investors vote on independent directors.
The IoD said the FCA should reconsider its proposal in order to maintain the UK’s reputation for corporate governance and protect investors. It also highlighted the risks associated with sovereign-controlled companies, including government interference.
The UK government has come under fire in recent months for hinting at changes that could effectively turn the UK into a tax haven after Brexit, in order to attract big businesses. But Chancellor Philip Hammond this week dismissed the suggestion, in an interview with French newspaper Le Monde.
“That is neither our plan nor our vision for the future,” he said.
The FCA’s consultation on the proposed changes closes on 13th October.
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