The US Impact On UK Corporate Governance: Ripples Across the Atlantic

Scott Ormrod, Corporate Governance Manager at EQ Advisory, provides insight into the key areas where the US may influence the direction of the UK and European markets, the significant events that have occurred so far, and the factors stakeholders should consider when approaching these topics.

The key areas that are analysed in this article include Executive Remuneration, Company Listings, ESG, and Diversity.

Executive Remuneration

Remuneration is a key area in which this dynamic is most evident. In the US, pay packages for executives often exceed those in the UK. As a result, many UK companies are adjusting their remuneration schemes to remain competitive in the global talent market. A common rationale is that many companies’ operations and talent pools are US based, necessitating adjustment to US style remuneration, including the introduction of Restricted Stock Plans (RSPs), which are a prevalent feature of remuneration in the US.

RSPs have traditionally been less common in the UK than Performance Share Plans (PSPs) but are now increasingly introduced either as an alternative form of Long-Term Incentive (LTI) or combined with PSPs in a Hybrid structure.

RSPs have experienced opposition from some bodies due to them being perceived as a more guaranteed pay out, lacking the direct link to performance that characterises PSPs. It has therefore been expected in previous years that companies switching from a PSP to an RSP should discount the potential quantum of the plan by at least 50%, as advised in the Investment Association’s Principles of Remuneration. However, in the most updated version of the Principles, this element has become less prescriptive, stating “depending on the company's circumstances and the performance measures used in the previous plan a different discount rate may be considered appropriate”.

Proxy Advisors Stance

The Proxy Advisor ISS has maintained that “any increase in the level of certainty of reward is matched by a material reduction in the size of awards”. As RSPs are seen as having a higher level of certainty than PSPs, ISS have regularly opposed the introduction of RSPs due to what they see as insufficient discounting of potential outcomes.  An against recommendation from ISS should be expected for anybody wishing to make the transition to an RSP unless significant discounting is undertaken compared to any pre-existing PSPs. Glass Lewis, another major Proxy Advisor, has shown more flexibility when recommending on the implementation of RSPs, and therefore are more open to the rationales that companies provide.

What is changing

Multiple FTSE100 companies have introduced RSPs without exceeding 20% opposition, indicating there is some appetite from shareholders to support these changes.

Those seeking to introduce an RSP should situate their rationale clearly within a market context, emphasise the approach of peers, and the competition for talent globally. It is also important that shareholders are consulted on the approach as early as possible, and that clear rational on strategic alignment and value creation is provided. Where possible, present remuneration figures that demonstrate any disparities between your executives and those of competitors and elaborate on how proposed changes would address this.

Company Listings

Whether companies should list (or re-list) in the US has become a recurring topic of discussion, raising concerns about the overall attractiveness of the UK stock market. According to PwC’s Foreign Portfolio Investment Watch there are currently over 90 companies headquartered in the UK but listed in the US, some maintain a dual listing and note that there has been 23% growth in the market capitalisation of companies in this category between Q4 2022 and Q1 2025.

Factors affecting the decision to list in the US include valuation disparities compared with the UK. Deeper equity markets with greater access to capital, and more flexibility in areas such as remuneration and board composition, where there is less scrutiny than in the UK. However, potential developments in US tariff policy could act as a counterweight. As the current US government adopts a more protectionist approach to global trade, more companies may delay or reconsider US listings until the outcome of these developments becomes clearer. Much like Brexit, if the US hinders itself from participating in global trade it could harm future market prospects.

At the same time, listing in the US presents its own challenges. As noted by the London Stock Exchange (LSE) many companies struggle to secure inclusion in prized indexes such as the S&P500, and the reporting requirements present in the US such as the US Sarbanes-Oxley Act which require quarterly earning reporting, add further complexity.

It should also be acknowledged that the UK’s relative decline in appeal may not solely be a function of the US market becoming more attractive, but also of the LSE’s diminishing draw. Over recent years, the number of IPOs on the London Stock Exchange has reduced significantly, with 23 in 2023, and 17 in 2024, both setting a new low for offerings in recent years.

Some possible causes for this include the increased scrutiny and reporting requirements that listing entails. A listing exposes companies to a wider and more diverse investor base, scrutiny from Proxy Advisors, heightened shareholder expectations, and the need to invest in a more developed IR function. Shareholder bases may also include a higher proportion of passive investors, whose voting patterns may not always reflect a full understanding of company-specific context.

Increasing demands on listed companies, including heightened legal, regulatory, and administrative obligations, alongside associated financial burdens, may be discouraging more organisations from pursuing a public listing. As these requirements grow, some companies are opting to remain private to avoid the complexity and costs that come with being publicly traded.

In 2024 Just Eat Takeaway delisted from the LSE, citing their desire to “reduce administrative burden”.

ESG & DEI

Under the Trump administration, anti-ESG rhetoric and legislation has reached an unprecedented level of prominence. It was noted in research done by our US colleagues at DF King that Anti-ESG resolutions rose from 29 occurrences in 2023, to 61 in both 2024, and 2025. These resolutions covered topics such as the elimination of DEI metrics within compensation plans, medication distribution, financial surveillance, and more.

A key development in this area was the introduction of the Texas Senate Bill 2337, effective from September 2025. This bill requires detailed justification from proxy advisors for any recommendations influenced by non-financial factors, including ESG, DEI, or sustainability.

Both ISS and Glass Lewis have undertaken legal proceedings challenging the law, and the outcomes of these proceedings will be significant for the future of ESG in the US. Furthermore, as reported by our US colleagues, no environmental proposals have passed in the US in 2025, with average support nearly halving to 12.5%. The Trump administration has also targeted DEI directly, issuing three executive orders on the topic, which led both ISS and Glass Lewis to scale back the emphasis placed on DEI in the US policies at the start of this proxy season.

Some institutional investors, including BlackRock and Vanguard, have already faced backlash from the broader anti-ESG movement. In 2024, they were sued by multiple republican states for their climate-related initiatives. More recently, representatives of several Republican states issued letters to 25 large asset managers criticising the use of ESG and setting out five requirements they must adhere to, to continue doing business in those states. BlackRock and JPMorgan Chase have already reduced mentions of DEI in their filings, and BlackRock’s support for ESG shareholder resolutions has decreased as of last year. We have also seen several major UK banks withdraw from the Net Zero Alliance.

A core concern for UK issuers should be the extent to which US-based shareholders will carry the anti-ESG positions into their voting at AGMs, and whether such positions will be applied in a UK context.

Why Now and What Next?

The prevalence of this debate begs the question: why now? The US has always been a larger market than the UK, so access to a larger pool of liquid capital cannot alone explain current concerns about capital flight. One contributing factor may be the direction of the UK economy. Since Brexit, questions remain about how effectively the UK can adapt to international trade, while post-pandemic growth has lagged behind peers. According to the OECD, UK GDP in 2024 was 4.5% above pre-pandemic levels, compared with 6% in the Eurozone and 13% in the US.

Furthermore, US influence over the UK market has sharpened due to the Trump administration’s campaign against ESG and DEI. Proxy Advisors and Institutional Shareholders who operate on both sides of the Atlantic are under pressure to adapt, and any potential changes to their operations could affect how these issues are approached in the UK. This pressure comes not only from Government but also from the market itself. As more companies advocate for and adopt RSPs, Proxy Advisors and shareholders will need to decide whether to maintain their current stance or adapt to what may become new emerging market standards.