James Moore: Let's hope this brake on heavyweights works
Outlook The invasion of Britain's stock market indices by foreign natural resources companies with dominant shareholders and questionable governance has been a running sore among pension funds and their advisers.
Most hold at least some of their money in stock market index tracking funds because they make sense in terms of cost (they're cheap) and performance (they tend to do better over the long term than all but the best stock-pickers).
Trouble is if you track an index, you don't get any choice in the companies in which you invest. This means that pension funds – and many small savers – have recently ended up having to back the activities of some rather unsavoury businesses.
The problem was brought to a head by ENRC, the primarily Kazakh mining company that was memorably described as "more Soviet than City" by a former independent director who was sacked when the controlling billionaires threw a hissy fit. Yesterday, the Financial Services Authority sought to address the problem. It is proposing that in future where a company has a dominant shareholder, they will be identified as such by watchdogs, triggering the imposition of new rules to protect minority shareholders.
A company will have to have a majority of directors considered as independent by the Combined Code on Corporate Governance. If the controlling shareholder tries to kick out directors they don't like, the minorities will be handed the power to stop them.
There are also changes to the minimum amount of shares a company has to have in tradable "free float" if it wants to list in London, although the FTSE 100 already has tougher rules in place if a firm wants to be included in one of its indices.
It's all broadly to be welcomed, and not before time. The only problem is that it relies on "independent" directors behaving in a robust and independent manner while they sit on boards. As recent events have demonstrated, notably with the mining company Xstrata's attempts to pay its executives enormous bonuses, the theory doesn't always match up to the practice.
- 1 Jeremy Clarkson 'sees no problem' with his racist language on Top Gear, says BBC
- 2 'Alien thigh bone' on Mars: Excitement from alien hunters at 'evidence' of extraterrestrial life
- 3 Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
- 4 London restaurant 34 creates champagne glass modelled on Kate Moss’ left breast
- 5 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
'Alien thigh bone' on Mars: Excitement from alien hunters at 'evidence' of extraterrestrial life
Russell Brand opposes anti-Semitism after death threats: 'We must disavow all forms of prejudice that lead to exclusion and execution'
James Foley 'beheaded': Isis video shows militant with British accent 'execute US journalist' – as hunt begins for killer
ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
Microbial life found living on the exterior of the International Space Station, say reports
Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Isis threat: Cameron wants an alliance with Iran
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
Bin bag full of cats' heads discovered near Manchester's Curry Mile
Disgusting, frustrating, but intriguing: how the country really feels about its politicians
iJobs Money & Business
£30000 - £40000 per annum + benefits+bonus+package: Harrington Starr: C#.NET ...
£20000 - £30000 per annum + benefits+bonus+package: Harrington Starr: Junior D...
£550 - £650 per day: Orgtel: Business Analyst - Traded Credit Risk - Investmen...
£55000 per annum: Harrington Starr: A financial software vendor at the forefro...