In May 2023, the London Stock Exchange (LSE) called for a “big tent” discussion to consider the competitiveness of executive remuneration and raised concerns that some UK listed companies could not compete internationally to attract and retain key executive talent. This call was in the wake of a number of high-profile listing departures from the LSE, as some companies rejected the venerable stock exchange in favour of growth opportunities and deeper pools of capital elsewhere.
The ensuing years have seen elusive economic growth in the UK and further losses of ground for the LSE against some of its international counterparts. Recently, the stock exchange’s largest constituent, AstraZeneca, received shareholder approval to list in New York to further enhance its ability to access global pools of capital, although it has maintained its London listing.
Since 2023, the UK market has seen the removal of a number of long-standing corporate governance market standards, as politicians, regulators and other standard setters have sought to grapple with the country’s recent economic difficulties and competitive concerns, and attempt to encourage more companies to stay or list on the LSE. These changes have often come via updates to key cornerstone guidance documents, with the intention of streamlining procedures and reducing prescriptive requirements on listed companies, including the UK Corporate Governance Code, the Investment Association (IA)’s Principles of Remuneration, and the Financial Conduct Authority (FCA)’s Listing Rules[1]. Other changes have originated from UK listed companies themselves, especially on executive remuneration, as many endeavour to recruit and retain senior executives while competing in international markets that have different remuneration and corporate governance standards.
Some of the most significant of these changes in recent years include:
- The allowing of companies to have multiple class share structures at admission to the LSE.
- The required disclosure thresholds surrounding significant and related-party transactions being made less stringent, with many no longer requiring either disclosure or a shareholder vote to approve.
- The removal of the requirement for UK listed companies to have relationship agreements in place with any controlling shareholders.
- The increasing of the ‘substantial shareholder’ threshold from 10% to 20% of issued share capital.
- The retirement of the IA’s Public Register, which disclosed UK companies that had received 20% or more of votes cast Against management resolutions at shareholder meetings.
- The removal of the requirement for short sellers to publicly disclose their identity and positions – instead, the total short position in each company being aggregated.
- The emergence at the board level of so-called ‘hybrid’ executive pay plans that combine time-based share awards with performance shares in long-term incentive structures.
- The removal of the long-standing lower “5% in ten years” dilution limit for discretionary equity plan awards (the overall “10% in ten years” dilution limit for all share plans has been retained).
- The softening of the market standards for executive annual bonus deferrals, with the guidance percentage of bonuses to be deferred into shares being lowered or removed entirely if an Executive Director has met their shareholding requirement.
- A clarification by the Financial Reporting Council that the long-standing UK norm of paying Non-Executive Director fees in cash rather than equity need not be the case, and that non-performance related shares can be an alternative.
A race to the bottom?
Taken individually, some of these changes could be seen as only tinkering around the edges of established corporate governance standards. However, when considered holistically, some commentators view them as representing a concerning piecemeal erosion of long-standing good governance standards and shareholder protections that have positively differentiated the UK from many other markets and which have been to the benefit of companies and investors alike. The International Corporate Governance Network (ICGN) wrote to the FCA in March 2024 in response to the regulator’s consultation on the changes proposed to the UK Listing Rules to express significant concerns with the proposed loss of several shareholder protections that had been intrinsic to the UK market and to the UK’s reputation for high corporate governance standards and investor protection. The ICGN’s response to the FCA included the following:
“ ICGN encourages the FCA to take investors’ feedback into account. Investors recognise the challenges that the UK and other markets face with a reduced number of IPOs over recent years. However, they have expressed the view that, while it is unclear whether the changes proposed to the listing rules would help attract listing in the UK, the proposed reforms are likely to harm the UK’s reputation as a market with robust investor protection, high corporate governance standards and a stable policy environment, thereby potentially reducing the attractiveness of UK listed companies. Factors such as liquidity, access to sophisticated investors with a deep understanding of the company’s sector, valuation and research coverage, and the presence of comparable companies in the market are among the key factors that determine where a company chooses to list. The speed of the process leading to the IPO, access to talent, and tax matters can also be key considerations. The FCA does not address these factors.”
In July 2025, a group of UK pension funds, collectively managing GBP 3.2 trillion in assets and chaired by Railpen, launched The Governance for Growth Investor Campaign (GGIC), which aims to highlight the importance of retaining good governance standards for UK economic growth and prevent a race to the bottom in terms of such standards. The launching of the GGIC has been widely seen as a response to the updated Listing Rules and an attempt to prevent any further watering down of UK corporate governance standards. This also comes as the UK Government is encouraging UK pension funds to invest a larger percentage of their holdings in domestic companies.
Head of Investment Stewardship and Co-Head of Sustainable Ownership at Railpen, Caroline Escott, stated the following in relation to the recent efforts to increase UK economic growth, including the 2024 Listing Rule changes:
“Damaging to this drive is the misperception that the UK’s historic world-leading corporate governance and shareholder rights mechanisms unnecessarily hinder growth, rather than providing the UK with a key differentiator and supporting long-term value creation in the interests of everyday UK savers. Last year’s UK listing changes watered down many longstanding shareholder rights – changes which to date do not appear to have had a positive effect on the UK IPO environment.”
Or necessary changes to ensure competitiveness and growth?
On the other hand, some stakeholders have argued that the changes seen so far are required to ensure that the UK remains competitive in an increasingly global competition for executive talent and investment.
For instance, in November 2025, CEO of the LSE, Dame Julia Hoggett, spoke at the FT’s Future of Asset Management Europe conference on the recent shift in UK executive pay and the more “forceful” nature of remuneration committees in ensuring that their Executive Directors are remunerated competitively:
“We are talking about being able to attract and make sure we can win in the war for talent so that our companies can have the best leadership to drive the best shareholder value.”
She also highlighted the UK Corporate Governance Code’s requirement for companies to engage with shareholders and report on their activities if any management resolutions receive at least 20% dissent at company meetings. According to Dame Julia, the requirement created a “naughty step” that is no longer functioning as it should, given the number of companies that have been required to implement this provision:
“If one of your children is on the naughty step it is a naughty step, but if all of your children are on the naughty step it is a play date.”
With the retirement of the Investment Association’s Public Register in October 2025, the number of companies on this “naughty step” is no longer being centrally recorded, as was previously advocated by the UK Government.
The need for the UK market to remain competitive was also recognised in the November 2025 Budget, with HM Treasury introducing Stamp Duty tax relief for three years on shares bought for companies deciding to list in the UK:
“The government is building on its ambitious programme of regulatory reforms and recent positive momentum to ensure UK capital markets competitiveness, and that they support firms to raise the capital they need to grow and invest. This includes introducing the new UK Listing Relief, a three-year exemption from Stamp Duty Reserve Tax for companies listing in the UK.”
Numerous commentators have long called on the Government to entirely remove the 0.5% Stamp Duty levy on share purchases to allow the UK stock market to compete with other markets that have no such tax. However, given budgetary pressures, as of yet it still remains in force for companies already listed in the UK.
UK competitiveness and the future
Despite the recent changes to “streamline” corporate governance standards and investor protections, the UK’s economic difficulties and worries in relation to UK listings continue. A number of UK listed companies have also highlighted ongoing difficulties in competing with other markets for global executive talent. It remains to be seen if changes in corporate governance regulations and standards will continue and if further erosions of long-standing UK market practices will be made in the name of improving global competitiveness in the coming years.
[1] For more information, see: Latest Version of the UK Corporate Governance Code Released, IA Publishes Simplified UK Remuneration Principles and The Introduction of Multiple Class Share Structures to the UK Market.
By: Tom Inchley
