John Thain, chief executive of the New York Stock Exchange, on Friday criticised the Alternative Investment Market in London for its lack of stringent corporate governance requirements for listed companies and said it needed to continue raising standards to avoid damaging the City’s reputation.
Mr Thain, speaking at a media briefing at the World Economic Forum in Davos, said he believed that the London Stock Exchange was changing its approach “particularly in relation to Aim, where they did not have any standards at all and anyone could list. I think they are starting to tighten up, and they should.”
Mr Thain said that neither the LSE’s main market nor Aim, which is its market for growth companies, had such a strict approach to corporate governance as US exchanges such as the NYSE and Nasdaq. He believed that London “had to be careful not to damage its reputation by allowing in companies that are not well run”.
But Martin Grahham, head of Aim, on Friday told this year’s Aim conference at the London Stock Exchange that the increase in the market’s international profile had thrown up misunderstandings and misperceptions.
It had also unsettled the stock exchange’s overseas competitors, Mr Graham added, “who have responded by directly and indirectly attacking Aim’s record in attracting international companies - even where the statistics do not warrant it.”
The NYSE has been losing market share in the listing of international companies to the LSE and there is widespread concern among politicians and bankers in the US that companies have been put off by its legal framework and the burden of complying with the Sarbanes-Oxley Act of 2002.
Mr Thain said the Securities and Exchange Commission was already planning changes to Sarbanes-Oxley that would make a US listing more attractive. But he said that the US would continue to “take a more proactive approach to what our companies are doing” than London in order to protect investors.
Mr Thain added that the London Stock Exchange had “the second best brand in the world” after the NYSE as a good exchange on which companies could list. “If for any reason you choose not to enter the US, then for the most part you want to list in London. London does have a great brand.”
Mr Thain left open the possibility of the NYSE making an offer for the LSE at some point in the future if Nasdaq’s current bid fails. But he said that his exchange would concentrate this year on implementing its merger with Euronext. It is also working on a less formal partnership with the Tokyo Stock Exchange.
Aim requires each of its 2,500 listed companies to have a nominated adviser, usually an investment bank, that monitors corporate governance and compliance after its flotation. Aim companies do not have to meet safeguards that are typical of other exchanges, such as shareholders having to approve some transactions.
Many companies from Russia and eastern Europe have come to London rather than New York to list and there are concerns that some of these companies do not meet western standards of corporate governance. Aim put in place tighter guidelines for resources and mining companies, particularly international ones, last year.
Additional reporting by David Blackwell in London