Council pension funds criticize London Stock Exchange

The London Stock Exchange (LSE) is facing renewed criticism from a group of local council pension funds over its recent push to soften boardroom rules for listed companies. The Local Authority Pension Fund Forum (LAPFF), representing 87 local authority schemes, has expressed opposition to changes proposed by the exchange’s chief executive, Dame Julia Hoggett. The LAPFF has long been vocal about its concerns regarding corporate governance standards. Specifically, the group is wary of Dame Julia’s efforts to reform listing rules, which they believe will lower boardroom standards. Dame Julia, who also leads the Capital Markets Industry Taskforce (CMIT), an industry group resistant to tightening the UK’s corporate governance code, has recently opposed rules that would make companies report on Environmental, Social, and Governance (ESG) metrics. These proposed rules were scrapped earlier this year. Further fueling concerns, Dame Julia has publicly argued that chief executives on the stock exchange are underpaid compared to their U.S. counterparts. This has led to fears that governance rules on executive compensation might be relaxed.

LAPFF opposes LSE boardroom regulations

Doug McMurdo, chairman of the LAPFF, criticized the push in a letter dated August 30. He stated that the proposed changes lacked sufficient analysis and evidence to withstand market scrutiny. This letter marked the third complaint from the forum, which manages £350 billion of assets, on the matter. Despite these criticisms, the CMIT argues that easing listing rules will attract more company founders to choose London over other markets like New York for their initial public offerings. The stock exchange has been under fire for a lack of new listings in London, especially after the British microchip company Arm chose to list in the U.S. instead in 2023. Addressing this issue, McMurdo emphasized that the cost of capital is set by market investors, not by lawyers or sell-side interests, which he believes have been overrepresented by the CMIT. The LAPFF’s staunch opposition underscores the broader tension between fostering a competitive market environment and maintaining rigorous governance standards. The LSE Group has been approached for comment.