Votes for sale is a bad idea
If stock lending is so bad the regulators have considered banning it, why is selling votes any better? Treasury minister Lord Myners seems determined to end the concept of one share, one vote.
Myners – an unelected politician – seems obsessed by voting methods. First he suggested differential voting with long-term shareholders given more votes than new investors; now his idea is for shareholders who do not vote to sell electoral rights to others.
At first sight the idea simply looks daft. On deeper investigation, however, it looks worrying dangerous.
One minor worry is that it would reward lazy investors or those unwilling to engage with companies (as Myners thinks shareholders should). Indeed it encourages companies to take the money and forfeit their voting rights.
More importantly, vote-selling is open to considerable abuse. Selling to other shareholders would give them disproportionate power but selling to people who own no shares at all would give them a say in how a company is managed while having no economic interest in it.
And why would anyone want to buy votes if it is not to provoke or prevent change? The price of the votes would presumably reflect their value in influencing the outcome of a poll, which at times could make them as important as a takeover bid.
But whereas stock is lent throughout the year, usually for short periods to cover unsettled transactions, votes would presumably have value only when there was a shareholders’ meeting. Hopefully the complexity will help kill Myners’ idea. He even acknowledges the potential dangers by conceding that a limit, such as two votes per share, would be necessary.
But the most important reason for crushing it before it gains credibility is that it runs counter – like the differential-voting concept - to democratic rights which give each shareholder a voting power proportionate to the investor’s holding. One share one vote is a good principle with defending.
Myners keeps directing his ideas at Sir David Walker, the ex-banker now completing a review of banks’ governance for the Treasury. The normally diplomatic Walker is going to have to be strong on this. Myners may be one of his masters but Walker must tell him these ideas are non-runners.
