On the money

Shareholders have engineered his departure because the business has been
struggling and the share price has been all over the place.

But as he told the Financial Times: ‘It is difficult when you don’t know who
the shareholders are and which ones have positive positions and which have a
negative strategy. How can you please investors when half of them are going

There is no answer, but it would help if boards could find out who has an
economic interest in the business. Under the current law, shareholdings have to
be disclosed, but hedge funds often do not buy the actual shares. They avoid
stamp duty, disclosure requirements and constraints on liquidity by trading in
equity linked derivatives.

No one knows who owns, or does not own the British quoted company any more.

The corporate lobby, including the CBI, wants this to change so that the
economic interest of investors held through derivatives will be as easy to track
as the voting interest shown by the shareholdings.

The trouble is the voting interest can only add up to 100% so it’s a finite
thing to measure, but the intangible nature of derivatives means there is
theoretically no limit on their size or proliferation.

So detailed disclosure, even if desirable in concept, may be overwhelming in

The Financial Services Authority last month issued a paper – since widely
ignored – asking whether such disclosure was what people really wanted.

But before answering in the affirmative people should also be aware of its
second question. If yes, can they suggest how it might be done?

Anthony Hilton is finance editor of the Evening Standard

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