Assessing Corporate Governance and the London Stock Exchange: A Historical Analysis

International Journal of Applied Finance For Non-Financial Managers (ISSN: 1742-528X) Volume 1 Issue 3

Zenzo Dube and Kerry E. Howell

Key words: Corporate Governance, London Stock Exchange, Cadbury Report, Hampel Report, Financial Services Authority.


In recent years much debate has centred on corporate governance. The modus operandi of the United Kingdom 's form of corporate governance is more of reactive than proactive. This reactive stance has serious repercussions for the London Stock Exchange (LSE) as it hosts the listing platform for public companies and the FTSE100. It is thus essential for the LSE that corporate governance procedures work as it needs to ensure that the investor has confidence and trust in it's listings. A weak corporate governance system coupled with corporate malfeasances from the Exchange's members inevitably fails to instil investor confidence. The LSE needs to convince its existing clientele and would be investors that it can run its affairs with proper conduct and integrity. A nervous investor is unhealthy for any business system. The LSE is one of the leading stock exchange markets in the world and is the financial nerve centre of the United Kingdom as it forms the very nucleus of the ‘square mile'. According to the LSE it ‘serves to ensure that orderly markets are in place through rules, guidance and monitoring of trading and market activity and the exchange's primary aim is to provide issuers, intermediaries and investors with attractive well regulated markets in which to raise capital and fulfil investment and trading requirements' (www.londonstockexchange.com).

This paper aims to highlight the impact of corporate governance upon the LSE. This paper will be split into three sections. First this short paper outlines the history of the LSE and identifies embryonic corporate governance procedure. In this way the paper uncovers factors in the present LSE that can be traced to its inception in terms of governance procedures and fair trading. Second, it provides a definition of corporate governance and investigates change to procedures in the late twentieth century. Finally, through an analysis of the on going reports relating to corporate governance and interactions between the LSE and Financial Services Authority (FSA) the historical nature of the relationship between the LSE and corporate governance is made explicit.

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