The UK should avoid “wearing the hair shirt” that would stymie reforms intended to loosen the rules on dual-class shares at the London Stock Exchange, according to an investment expert responding to calls for a pause on proposed changes.

Craig Coben, a veteran investment banker with Bank of America Merrill Lynch and now managing director of SEDA Experts, providers of expert witnesses, writes in the Financial Times that reforms are needed and opposition should be ignored.

The proposed reforms would see the lifting of sunset clauses on dual-class shares, the introduction of a single listing category instead of the current ‘premium’ and ‘standard’, and a switch from a rules-based approach for listing rules to a “disclosure-based” system. There are also proposals to remove the need for shareholder votes on some significant transactions.

Coben says these are “baby steps” in the effort to “rehabilitate” London after it witnessed delistings and an “IPO drought”. He argues the reform would bring London into line with other markets.

“It would bode ill for the City’s revival if the UK couldn’t even amend its listing rules to align them with the rest of the world.

‘Priggish’

“It is a fine line between being principled and priggish, and the UK has derived little benefit from wearing the hair shirt of its stricter standards.”

Coben argues that the International Corporate Governance Network’s argument falls down because the signatories happily invest in jurisdictions where governance standards are not as strict and offer a lower cost of capital.

Coben is responding to an open letter published by the ICGN and other investors, which called on the Financial Conduct Authority (FCA) to halt the changes, arguing they would expose investors to “unnecessary risks”.

The ICGN said: “We would strongly suggest the FCA considers retaining these critical protections.”

It added: “We also strongly believe that the votes on significant transactions and related party transactions provide useful protections for investors and that removing them exposes unnecessary risks.”

The FCA is expected to announce a decision on the proposals next month.

The debate comes as part of a wider effort by many senior City figures to halt the decline of the London Stock Exchange which has, in recent years, suffered a decline in new IPOs, the flight of companies to other markets and a loss of support from many investors.

So serious has the situation become that a special group, the Capital Markets Industry Taskforce (CMIT), has emerged under the leadership of Julia Hoggett, chief executive of the London Stock Exchange, to find ways to improve the City’s attraction for investors and companies.

Higher pay for CEOs

Part of the effort has been championing reform, but CMIT has also lobbied against further governance measures and campaigned for higher chief executive pay to compete with other markets.

CMIT had some success last year persuading the government to kill off new reporting measures, which had been proposed as part of a sweeping review of audit and governance following the high-profile collapse of companies such as Carillion and BHS.

There is also some evidence that higher CEO pay packages are starting to be agreed, though they are unlikely to ever complete with US-scale remuneration deals.

However, there has also been outspoken opposition to bigger pay deals and the curtailing of audit reforms. Many in the finance sector are still waiting for a promised new regulator, with beefed-up powers, for audit and corporate reporting.

The debate continues over the future of London as a financial centre, particularly after Brexit. Though it has not emerged as an issue in the current political campaigning for next week’s general election, all parties have an interest in promoting a more buoyant UK economy. Part of that desire will be a London Stock Exchange that performs better. The answers are still in development.