Mandatory share voting for transparency, accountability and fairness

“….Sunlight is said to be the best of disinfectants ……”; Louis Brandeis.


What we want is transparency in financial transactions because we believe better accountability and fairer taxation will flow from transparency. What we have is an opaque system that gives unnecessary privileges to the rich and to their agents and that disenfranchises the taxpaying, investing citizen.

Radical solutions, in the old sense of the word, that work from the root of the problem from within structures are preferable to “post facto” regulatory or legal external add-ons.

The existing structure of corporate governance is meant to endow shareholders with the responsibility (commercially, financially, legally and morally) of managing the company in exchange for right to draw on the profits that accrue. Sadly, it has evolved into system where almost no one can be held accountable and the collection of profits is disintermediated by pension funds and investment vehicles.

Some of these funds and vehicles, as shown by Legal&General’s APPG testimony last week, recognise the systemic weaknesses in the current shape of regulation and practice and are attempting to use the voting rights of shares to directly assert changes in corporate behaviour. This is to be applauded and assisted.

A very simple way to do this would be make a small change to the Companies Act making it a mandatory requirement for a share to have exercised its voting rights in the preceding years Annual General Meeting (AGM) before it can collect any dividends in the following year.

The effect of this will be to make visible what are the actual investment policies of the companies and the funds and to empower those demanding responsible behaviours.

There is no intrusion into privacy here as shareholder registers of public companies are just that; public. There is very little administrative burden here as the share register is already meticulously kept and processes for counting votes are already in place, even if they are infrequently used. The change requires only one extra data point to be added to the already computerised registers.

We want shareholders to start taking responsibility for the privileges that they have been granted; they have voting rights, let them be seen to stand up and, transparently, explicitly state what side of the debate about commercial, financial, legal and moral practice they stand on.

The transparency will be immediate but it must be said that the desired change will take a bit longer to come through. It will take some effort to rouse the ultimate beneficial owners, the citizens, to assert their rights and to change the direction of the commercial leviathans. But instead of “pushing on piece of string” they will be pushing on an iron lever.

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