Corporate Secrecy

Full personal security checks were in place at the Mayfair Intercontinental Hotel, and convincing proof of identity was demanded at the door.  Why?  Because only "shareholders" were allowed in.  As a matter of law, the affairs of even the greatest and wealthiest corporations are private affairs.  An Annual General Meeting is technically a private meeting between a company's shareholders and it Directors.  Even the press may legally be excluded.  The Company Auditors technically report not to the public, or to workers or to customers (or to potential share-purchasers...) but exclusively to existing shareholders, explaining and reporting the position to them, in their capacity as the owners of private property. 

That is wrong.  True, that is how MPs thought of "business" in 1856, when they passed the first modern Companies Act.  But now that trading corporations rank among the most important and influential organisations in the world, their affairs should be opened up to public scrutiny.  All General Meetings should be public meetings, open to the Meeja.  And shareholders should have access to the Company's files and records, subject to an overriding Board discretion to protect commercially sensitive information.  It is true that such access would give competitors a much better understanding of every Company - but that would simply sharpen the competitive process, to the benefit of all.

"Borrowing" Shares

British Land has one "rebel shareholder", namely Laxey Partners, an investment firm (literally, in old-fashioned usage, a "capitalist").  Laxey criticises British Land management for poor returns and a share-price which values the Company at well below the total value of the property it holds (that is true of all quoted property companies, but Laxeys say that British Land is worse than the average).  They want the British Land to give capital back to its shareholders, because BL Management is not making good use of it.  The other large UK property company Land Securities, plans to give £541,000,000 to its shareholders, precisely because they cannot find enough sound investment projects.

Now: last week, Laxeys held just 2.9% of British Land shares.  But this Tuesday, they turned up and claimed to be entitled to vote 9% of the shares, because they had "borrowed" voting rights from other shareholders who did wish to use them!   It seems that they had found some legal way of doing that, although it is a very odd transaction.  It is however an indication of just how desperate active shareholders are to secure some say in the conduct of a major company's business.  My own view is that shareholders should indeed be brought in, by the reform of company law, as an important - and public - check upon the abuse of management power.  And their prior approval should be required for a range of key company decisions, including management remuneration.

Giving capital back

Returning capital to shareholders is an unusual move, for modern management.  However, in the period 1770/1840, namely the early years of the industrial revolution, lawmakers were experimenting with the regulation of artificial personality.  There was no Companies Registry then, no Companies Registrar, every company had to have its own private Act of Parliament, and many different formulae emerged.  One Cornish tin-mining company (whose name now escapes me...) had a very unusual constitution.  The Members (i.e. the shareholders) gave funds to the Management to launch the business, and every year the  Management had to come up to London and persuade the shareholders to leave their capital in the business!  If they did not put up a good case, the Members were entitled to ask for their money back.  True, that practice had disappeared by 1840, and it is not reflected in modern company law - but I fancy that Laxey Partners would have approved...

Press Freedom

Two cases this week turned the political spotlight on the freedom of the Press.  All the leading newspaper Editors of Fleet Street were ordered by the High Court, in the Interbrew Case, to reveal their sources, and identify the person who had leaked to them the internal Interbrew correspondence outlining its investigation of a South African competitor.  Interbrew is a Belgian brewing company, and they were investigating the possibility of making a bid to buy South African Breweries. And the UK High Court rose inexplicably to its full height and ordered the four UK companies (including Reuters) to "name their sources".  The information, the UK judges held, was confidential to Interbrew, and that confidentiality had been breached.  The offending Editors would have to go to prison, if they refused.

My own verdict?  This is silly storm in tea-cup.  The UK Court was quite wrong to order disclosure, in this trivial case.  It is true that, legally, there is no such thing as the freedom of the Press.  The Human Right of freedom of expression (now assured by the Human Rights Act 1998) applies in essence to the private individual, and cannot be asserted by the diverse artificial persons, the trading corporations that make up the modern Meeja.  The principle of a free Press is founded, rather, in the proposition that all power systems should be exposed to probing by independent and open Meeja - the proposition that a system that protects Meeja freedom is likely to be better than a system that suppresses it - I subscribe fully to that proposition, but it is not strictly a Human Rights principle. 

The UK judges should have concluded that Interbrew, as Plaintiffs, were pursuing extremely trivial and vindictive corporate objectives, and should not be supported, particularly in view of the weighty systemic considerations on the side of the Editors, and of Reuters. In making their much-vaunted evaluation of the relative weight of these two principles, the Judges should have come down unambiguously in favour of Press freedom.  The Judges simply got it wrong.  Interbrew were merely trying to protect their own bad management, a cause without merit or substance.   And that should have ended the matter.  Instead, it will now drag on - until the Editors win.

Andrew Meldrum, journalist of Zimbabwe, was the star of the second case.  Having settled in Zimbabwe and lived there for the last 22 years, and having been granted the right of permanent residence even though he retained his US Citizenship, he faced sedition charges for having published, on The Guardian's Website in London, allegations of atrocities said to have been committed by Mugabe's henchmen, allegations later shown to have been untrue.  The Prosecution alleged that publication on the World Wide Web was sufficient to constitute "publication in Zimbabwe" for the purposes of the Prosecution.

Meldrum was this week acquitted, only to be immediately expelled from Zimbabwe, on 24 hours' notice - jubilation all round, coupled with apprehension, for the future of press freedom in Zimbabwe. 

I am concerned with three aspects of this case. 

• First, the question of the "location of publication" was not even addressed: the Judge merely ruled that Andrew Meldrum was just a cog in the Meeja machine, doing his job - it was the Zimbabwe newspaper the Daily News which published the original report that company should be in the dock, not Meldrum.   Meldrum was therefore not guilty.  The central issue of the nature of Internet publication remains a difficult one, and will probably have to be resolved as a matter of international treaty.
• Second, what is the meaning of a right of "permanent residence" in Zimbabwean law?  Readers will know that I am working towards a new international concordat on migration and citizenship and I favour the development of just such a right of abode, bestowing upon a resident of more than four years' lawful standing the assurance of permanence for life (see  QUADAS) - but in this case Andrew Meldrum (after 22 years' living and marrying in Zimbabwe) was summarily expelled from the country on 24 hours' notice, presumably because he had not actually taken Zimbabwean citizenship, and remained a US Citizen.
• Third, should someone like Andrew Meldrum be permitted to "ride both horses" in the status race, and enjoy both permanent residence in Zimbabwe and the right to return to America at any time?  The British tradition has always been to permit dual citizenship, without demur; the Continental jurisdictions have tended to force the individual to choose allegiances, sooner or later.  I have some sneaking sympathy with the continental Either/Or principle, in spite of the fact that UK law has never adopted it. My nose tells me that, in any process of international negotiation, this concession would have to be made, if universal agreement were to be secured.  If Andrew Meldrum refuses, after 22 years, to opt for Zimbabwean citizenship, then maybe he must also accept the risk of deportation - though never of course without rights of independent appeal, and never at 24 hours' notice...

Dubya's seedy business history

What do think of all this?  Do you remember anything about the Savings and Loan scandal?
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My professional experience is limited, as a criminal trial lawyer.  But at least I have that experience.  I have experienced the pressures of participating in jury trials - and I have very clear views on the Government's proposed changes.  This is what I think.

I applaud the Government's willingness to keep the administration of justice under constant review.  Policing considerations change, administrative considerations change, social conventions change.  And the price of liberty is eternal vigilance.  The best of systems are always going wrong, and need constant monitoring.

I welcome the Government's abandonment of its earlier plans to curtail jury trial, merely for financial and administrative reasons.  That demonstrated a profound failure to understand the balance of our system of justice, and still casts a real shadow over David Blunkett's personal judgment, and the collective prejudices of the Home Office.  Let us be grateful that the scheme has been abandoned.

I favour the proposed extension of the sentencing powers of the Lay Magistrature.  The limitation of their powers of imprisonment to six months' has always been a significant restriction upon their usefulness.  The proposed extension to twelve months is the right move, and will undoubtedly reduce "demand" for trials at the higher Crown Court.  The participation of Lay Magistrates throughout the administration of justice is of key democratic significance, and I favour its extension, not its curtailment.

I favour the proposed increased investment in better Court premises, showing greater respect for witnesses, jurors and members of the public, providing them with decent refreshment and waiting facilities - waiting is bound to remain a feature our day-in-Court judicial tradition, which must at all costs be retained.  But just as new information systems have made waiting-for-a-London-bus a less distressing experience, so the public attending Court should be more respectfully welcomed.  Maidstone Crown Court (where I recently attended an outrageous and unjust cannabis-possession prosecution) offers a very pleasant environment for those waiting.  But many thousands of old-style Courtrooms still exist, demoralise witnesses and jurors, and hamper the administration of justice.

But I reject the whole concept of shifting the balance of justice "towards the victim".  I realise that my views are unconventional, on this point, so I shall confine them to a   Footnote...