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Sanusi-watching has become Nigeria’s most popular spectator
sport. Every other week, the Central Bank governor beams his searchlight at a
dark corner of the banking attic to expose a mangled mass of cobweb. Oddly, his
admission at a seminar last week that the regulator does not know the
identities of owners of significant blocs of shares in ‘a very large number of
financial institutions’ has been received with indifference. In typical
fashion, the gallery has latched on to his other announcement at the same event
that the CBN would limit the tenure of non-executive directors of banks to two
years subject to renewal only at CBN’s instance.

The CBN’s authority to impose a ceiling on non-executive
director tenure and the propriety of announcing a major policy decision at a
public forum aside, I think that companies should applaud Sanusi for
championing transparency in shareholder identification. However, my reasons for
urging their interest diverge sharply from the Central Bank governor’s who
asked ‘Who owns the banks? Are they money launders or drug barons?

In fact, it baffles me that there has never been any public
advocacy on the subject of shareholder identification. There may be a good
reason why it has been kept off the agenda. Could it be because quoted company
boards of directors, stock brokers, issuing houses and registrars are complicit
in freezing the trail that leads to some beneficial owners? Or might it be that
they have been so busy covering up their own tracks that they are missing the
significance of the tracks being laid by non-insider investors? Their covert
ambition has been to ensure that control never slips out of their hands. Did
anyone say ‘hostile takeover’? Not in your dreams, not in my time. They and
their proxies are in firm control. Why would they bother about any shareholder
identification when the free float is laughable and they have a maze of
interlocking ownerships that would make any Byzantine emperor proud? With that
kind of moat, they can flick away any interloper’s unsolicited interest like a
dead insect.

Anyone who has followed global markets in the last few years
knows that shareholders can wield influence far in excess of their ownership
stakes. Activist investors with absolutely no interest in taking over the
company have become a fixture of the governance universe. From retail investors
like Eric Jackson who with only 45 shares launched a widely covered shareholder
campaign against the board of Yahoo! using YouTube in 2006 to the Roman
Catholic Sisters of Charity of St. Elizabeth who pushed for the publication of
risk management policies in plain English at Bank of America’s 2010 annual
general meeting and went on to win 39 per cent of votes in support, there is a
trend for proposals to stand on their merit and not on the number of shares
owned by a shareholder.

The bulky ledgers of tiny print with columns of names and
holdings in registrars’ offices contain a wealth of intelligence for every
company’s investor relations (IR) efforts. Companies are fond of mistaking
blasting ego-propping communications of corporate accomplishments to
shareholders as IR. That is mass communications and useful as it may be, it
does not build relationships, which is the operative goal of IR. Boards need to
closely monitor the geographic breakdown, composition, concentration,
investment styles and turnover of their shareholder base to craft effective
investor relations strategies. Anything else is akin to throwing spaghetti on
the wall.

In a paper calling for improved disclosure in shareholder identification,
‘Shareholder ID: The Resounding Silence of Non-disclosure,’ prepared by PR
Newswire’s Disclosure Advisory Board, the writers lamented the ‘thunderous
silence’ on hidden ownership. They argue that it is unfair to demand full
disclosure from companies while permitting investors who may have hidden
agendas from disclosing their interest in a timely fashion. Transparency is a
two-way street.

In banking, there is the policy of Know Your Customer. Companies
must now institute a policy of regular Know Your Shareholder audits. While
board members with vested interests will want to see Mr. Sanusi’s latest
comments as another round of witch-hunting about to begin, he is doing them a
big favour by indirectly fighting for their right to know buyers of their shares.
At least, now the law would ensure that no one comes from behind them to spring
a hostile takeover. However, the whole point of shareholder identification is
not about stealing the company from its owners. It is about giving them an edge
in their capital market relationships.

The writer is the managing
director of a full service investor relations firm based in Lagos.