We appreciate the opportunity to provide you with some feedback. When commenting on policy such as this we comment from the perspective of a non financial corporate issuer and their interests. On this subject of shareholder rights, governance and voting rights we have considered the generic principles that should underlie any decisions on actions as well as the practicalities.
We are strongly of the view that as owner of a share the shareholder should be at liberty to dispose of his property or property rights as he feels fit. That could involve splitting the votes from the economic interest and transferring on just one or the other.
It is for the contractual counterparties to agree such terms as they wish, which may cover the giving the party not officially on the share register the ability to direct voting.
Although we support the idea of freedom of contract and the right of the shareholder to deal with his property as he feels fit, we do see that at the extremes there could be a disruption to the normal interpretation of the directors duties to run the business “to promote the success of the company for the benefit of its members” (UK Company Act 2006).
This is normally interpreted to mean the creation of long term increase in shareholder value. If the shareholders have disposed of their economic interest it is conceivable that they may vote for the company to be run to achieve some other objective, but if they are the legal owners then this is their right to decide even if it is perverse by normal standards.
In practical terms it is imperative that the issuer should only have to concern itself with instructions received from the registered shareholder and that matters between the shareholder (and other intermediaries where relevant) and beneficial holders is a matter between the latter and not for the company. The company has no way of knowing what secondary arrangements have been made by the shareholder and were such arrangements to be disclosable by law this would introduce a huge complexity to the process.
It would place an unreasonable burden on the company which is not itself a party or beneficiary of whatever secondary arrangements have been put in place. In particular the timescales allowed for shareholder meetings and voting by proxy or in person are governed by company law and for certain important company decisions speed is important.