‘One share, one vote’ U-turn by Hong Kong regulator is welcome

When a long-held principle no longer reflects the investment reality of new-economy companies, regulators may be forgiven to want to loosen the rules. Companies with different classes of shares may be allowed to list on the main board of the Hong Kong stock exchange by the middle of next year under a new pilot scheme. The Securities and Futures Commission has had a change of heart about the sacred principle of “one share, one vote”, established as a cardinal rule of share ownership in Hong Kong since at least the 1980s.

A consensus has also emerged among the commission, the government and the stock exchange that it is not necessary to create a new board for listing such companies. Hong Kong has been facing intense competition from rival bourses in such places as New York, Singapore and Shanghai, which have long allowed listed companies to hold dual-class share ownerships. Such share structures enable company founders and/or the management to exercise strategic control even if they don’t own a majority stake. Many new-economy and bio-tech companies favour such arrangements.

If Hong Kong still insists on “one share, one vote”, it will be in danger of losing out on the highly lucrative market for initial public offerings. It has lost its crown as the world’s favoured destination for IPOs this year, having fallen behind New York and Shanghai.