Corporate governance rules ensure the investors who ultimately own companies are allowed to hold their directors to account.
Many principles - such as making chairman and chief executive separate roles - were formalised in the so-called Cadbury Report of 1992 that came out of a parliamentary committee set up to investigate company practices.
It was inspired by the appalling case of Robert Maxwell, the media magnate and MP who was revealed to have misappropriated a fortune from a pension fund and kept losses secret.
Today the UK’s Companies Act of 2006 governs most aspects of corporate structuring, and without it investors in listed companies would be powerless to hold directors to account.
Part 292 empowers investors who control at least 5 per cent of a company’s shares to requisition a company to circulate a resolution.
The shareholder is allowed to include a 1,000-word statement and the company has to circulate the resolution and statement to all shareholders.
But there are no requirements at all about how this information has to be presented or how proxy voting letters have to appear, for example.
As we have seen with Alliance Trust this has been done rather cynically, with bright red letters warning against activist investor Elliott’s proposals to appoint three independent board directors.
It has now emerged Alliance Trust has sent out supplemental form of proxy documents with highlighed frames urging shareholders to tick the boxes voting ‘against’ the three proposed appointments it is resisting.
When Elliott then sent out its own supplemental proxy forms, Alliance Trust updated its website to tell shareholders to “disregard the form which they have sent”.
This is a very aggressive approach, to say the least. Will the annual meeting itself also be biased and slanted in all sorts of ghastly ways?
My view is this - if the point of shareholder voting is to allow a company’s owners to access democracy, then shouldn’t companies be required to show democratic spirit?
Shouldn’t proxy voting forms and any other materials facilitating the voting itself be required to be plain and neutral to ensure investors aren’t influenced ‘at the ballot box’, as it were?
How are Alliance Trust’s less-well-informed investors, who may have simply inherited their shares and know nothing about governance, going to be affected by these voting forms?
I fear that many will simply tick the ‘against’ box in the honest belief that the fact the board recommends voting this way is the only thing that matters.
Imagine if the Conservatives put a big red box around their candidates’ names at the ballot box this coming general election.
I’m not saying incumbent board members shouldn’t be able to make their opinions heard - on the contrary.
But when it comes to the vote itself investors should be free to make their minds up without interference.
