Transparency is all very well, but top executives have rights to privacy.
CEOs in the energy sector have faced unprecedented scrutiny over the last few weeks over how much they are paid. Forward-thinking executives in other sectors will be watching the situation nervously. None will be able to take any comfort from David Cameron’s latest policy initiative, which forms part of a broad movement towards casting a spotlight on individuals’ financial affairs.
At the recent Open Government Partnership summit, the prime minister announced that details of who really owns and controls UK companies will be made publicly accessible. A newly created central registry will contain information on individuals with an interest in more than 25% of a company’s shares or voting rights, or who otherwise control the way it is run. Just last week, it was announced that the government has decided the register will be made publicly accessible.
Promoting the decision, Cameron said: ‘We need to know who really owns and controls our companies. Not just who owns them legally, but who really benefits financially from their existence.’
The new initiative signifies a growing movement towards individual transparency. If there was any doubt of this, one only needs to look to Switzerland, which has signed an agreement to share financial information with nearly 60 other countries. Until recently, the Alpine tax haven refused steps towards banking transparency, and over the summer, the Swiss parliament struggled to pass a bill to change the banking legacy. But it eventually buckled and agreed to comply with the US Foreign Account Tax Compliance Act, a bilateral client information swap with the US.
For a long time, companies have had to become familiar with the notion of ‘opening their kimonos’. Increasingly, individuals will be pressured or forced to adopt the same approach.
How far this trend will go is a cause for concern. Of course, shareholders and stakeholders have a right to know the workings of a business, and tax evasion should be clamped down on. But individuals are also entitled to rights of privacy. Financial arrangements are a key element of this. Just consider the uncomfortable silences that would follow should you ask at a dinner party how much everyone earns, or what their monthly mortgage payments are.
And it is not just executives’ finances which are coming under increasing scrutiny. Proving that ‘business has become the new showbusiness’, it is all too common to see pictures of executives’ family homes splashed across the newspapers. Children’s social media pages are trawled through by journalists looking for information on their parents. We have even had cases where paparazzi have tried to force their way into private wedding receptions.
All this attention on individuals means it is more important than ever to ensure they have adequate protection for their private lives. One of the easiest – but surprisingly often neglected – ways to achieve this is to make sure that the executives’ online footprints are not exposing them to unnecessary risk of media intrusion. The first step is to be aware of what information is publicly available about high-profile individuals. The process for ascertaining this needs to be much more sophisticated than a quick Google search as the web has a habit of entwining information so that it becomes deeply buried and referenced in multiple locations.
Technology is required to make an audit thorough. Armed with the full story of what information is publicly available, the reputational and privacy consequences of the information should be assessed and appropriate action taken to remove or curtail the footprint.
It would not be possible to turn back the transparency tide (and many would say it should not be). But it is possible to equip business individuals with more control over their privacy settings, so that they do not become easy fodder for media attacks.
Jenny Afia is a partner at Schillings