The recent concept release on the US proxy system has certainly brought some interesting challenges and concerns to the debate. A recent set of concerns from an investment advisor provoked some thoughts at Manifest about privacy, identification and equal treatment (i.e. a safe ride) for all shareholders.

Concerns that issuers may wish to somehow leave shareholders who are less supportive of management ‘out of the loop’ in terms of proxy access and/or information may be founded in truth. But could issuers really get away with ‘targeting’ shareholders in this way?

Whatever your view on that, it’s a serious enough concern for some active investment advisors to prefer the problems that shareholder privacy currently presents to the proxy process, than benefit from more efficient, transparent systems.

Yet, in other spheres of life we are all subject to rigorous transparency and identity checks, such as whenever we fly. That’s precisely because that transparency also offers security in these terrorism-conscious times. Whilst an aircraft manifest has much more immediate implications for our safety and security, should we be so sure that similar security may not be a valid consideration for our share registers, potentially for identical reasons?

There will always be legitimate reasons for wishing to retain anonymity as an investor, but that anonymity need not be incompatible with being able to identify each individual holding on a share register. That makes the accuracy of information flows much more efficient and the identification of ‘undesirable’ shareholders possible.

Whilst it’s not reasonable for issuers to use such shareholder identification in this way, it’s perhaps reasonable to allow our security agencies to do so?

Last Updated: 28 October 2010