How Can We Get Banks to Stop ‘Debanking’ Their Right-of-Centre Customers?

I’ve got a business idea. My product, called Shareholder-in-a-Box, is an AI powered, natural-language-processing, virtual shareholder that sits on Board tables and CEOs’ desks.

How does it work? Well, imagine that a CEO is considering an exciting proposal from a single-issue campaign group. For a modest fee, the group will come into the business and weed out any customers with whom it disagrees. And, best of all, when their work is done, they’ll give the company a digital certificate to pin up on its website. Pretty hard to resist, right?

This is when Shareholder-In-A-Box will pipe up and say something like: “Let’s consider this for a moment. What’s in the best interests of the company and its shareholders? Getting a certificate? Or revenue, customers, goodwill, and the long-term creation of shareholder value?”

Or perhaps the Board and the CEO have been asked to approve a substantial expenditure on a public campaign in support of trans rights. Sure, the company manufactures power tools, and there isn’t an immediately obvious nexus there but, the marketing team says persuasively, it’s Pride Month. “Just a minute,” Shareholder-in-a-Box will say. “Was the company incorporated for the purpose of advancing the rights of trans people, however just that cause may or may not be, or was it incorporated to conduct the business of manufacturing and selling power tools for the benefit of its shareholders?”

As you know, many Boards and CEOs struggle to answer these questions on their own. Shareholder-in-a-Box will help them through this complex decision-making process.

The obvious question, I hear you ask, is whether the problem is big enough to sufficiently scale a business? It’s a fair challenge, and I will answer it by asking whether you’ve noticed that, more and more, companies no longer want your business because, frankly, you’re beyond the pale.

You ask why Halifax staff need to wear preferred pronoun badges? Take your business elsewhere, you bigot. You use PayPal to accept donations for a website that raises legitimate questions about whether the benefits of lockdown outweighed the demonstrable harm it caused to a generation of children who were dependent on us, as adults, to make wise decisions on their behalf? Your account is closed, you conspiracy theorist. You’re using EventBrite to sell tickets to an event where one of the speakers thinks biological sex is real? Event cancelled, you purveyor of hate. Yes, this is a large and growing trend.

Well, you might say, even if that’s true, does it matter? Do Board members and CEOs care?

Yes, they do, though perhaps not for the reason you might expect, which is that, again and again, their failure to answer these questions properly results in a loss of customers, damage to the company’s goodwill and a drop in the share price. The real pain point for Board members and CEOs is that, as customers continue to melt away and the share price continues to drop, even the most passive shareholder might start paying attention and decide to attend the annual general meeting to vote. Even worse, they might start asking whether the Board members were in fact complying with their legal duty to act in the best interests of the company and its shareholders.

In the unlikely event that a practising corporate lawyer has found a spare six minutes in their billable day to read this, they may be grumbling about my over-simplification of U.K. company law. While Section 172 of the Companies Act 2006 requires that a company director acts in a way that they believe will promote the success of the company for the benefit of its members (generally, its shareholders), it also says, somewhat vaguely, that when doing so they must “have regard” to several considerations including “the impact of the company’s operations on the community and the environment”.

Does this really change anything though? It’s hard to see how. Taking a decision to incur some additional cost to avoid polluting a river, yes. Deciding not to move production to a cheaper location because it would adversely affect the current local community, maybe. Proactively embarking on a divisive political campaign wholly unrelated to the business? Nope.

In fact, the more you look at this situation, the more glaring the question about Section 172 becomes. We may assume that, if the power tool company referred to above was well run, the Board and CEO would have made sure that the company understood its market. Today’s data driven marketing strategies extend well past product features and into behavioural, demographic, and so-called psychographic segmentation. The blowback from refusing to serve customers because you disagree with their political views, or from publicly taking sides in the culture wars by running a political campaign, could not possibly have come as a complete surprise.

Can we really say that a Board that sanctioned the use of company funds to run a wholly unrelated political campaign, with no prospect of increasing sales and, in fact, a high likelihood of losing customers and damaging both its goodwill and share price, was really acting in a way that they believed would promote the success of the company for the benefit of its shareholders? Wouldn’t they in fact be likely to have breached Section 172?

For some reason, there is a strange concentration of this activity in the financial services sector. Last week, for example, Nigel Farage announced that his bank account had been closed and he’s been refused service by all other U.K. banks that he’s approached (nine at last count). Shareholder-in-a-Box will, therefore, require a specific financial services module.

What is different in financial services? Well, bank accounts are effectively an essential service in a modern economy, so the impact on a customer being denied service is potentially severe. So I’m sure the Financial Conduct Authority will start enforcing the legal obligation it places on licensed firms to “pay due regard to the interests of its customers and treat them fairly” (Principle 6 of the FCA Handbook), as I discussed here. Any day now.

My plan is that, in the future, whenever a licensed financial services firm considers authorising members of staff to close a customer’s account without a good faith application of the firm’s terms of use, and with no advance notice, explanation, opportunity to respond or rectify the issue, or appeal process, simply because that member of staff disagrees with the personal opinions of the customer, Shareholder-in-a-Box will be there to virtually tap the Board members and the CEO on the shoulder and politely enquire whether this is in fact treating customers fairly. As required by law.

You may by now be asking how it came to this? Are our Board members and CEOs uniquely unqualified or, perhaps, bad actors? Will it even matter what Shareholder-in-a-Box says to them? The truth is that, with a few glorious exceptions, the Boards of our major corporations are made up of intelligent and serious people. They are trying to navigate a strange new world, where Environmental Social and Governance (ESG) ratings agencies produce, with straight faces, reports that give some oil companies better ESG ratings than Tesla. Where fund managers with the collective or, in some cases, individual power to move a share price allocate funds by reference to these ESG ratings or similar factors. Where well-funded campaign groups might initiate a boycott of your business at any time. Where waves of young employees have arrived straight from the safe spaces of university campuses, steeped in Critical Race Theory and Gender Identity Ideology, not to mention theories of their own importance, and have a voice in the company too.

And perhaps most importantly, our Board members and CEOs would, like most of us, like to do good. Perhaps less nobly, but also relatable if we’re honest with ourselves, they’d also like to be seen and celebrated for doing good. And you’re not getting an award at a gala dinner for simply running a power tool company effectively.

Anyway, I will admit that, currently, this is all just a business plan. What I really need to prove my business case and kick-start adoption is an activist shareholder to bring a high-profile court case alleging a breach of Section 172. In a perfect world, Jolyon Maugham would appear for the defence. As his stated mission is to promote “good law” and not trivial, party-political adventurism, he’ll stride in wiping the dust and sweat from his brow, fresh from the fight after successfully challenging the Scottish Government’s latest flagrant disregard of legal and administrative norms. The public gallery will be packed and, as a hush falls over the courtroom, Mr Maugham KC will call his first witness, the company’s brand manager, who will carefully explain that the power tool company’s success depended on running a campaign in support of the trans lobby because, umm, well…

It’ll be the trial of the century. Shareholder-in-a-Box will quickly become a standard installation in Boardrooms and offices across the world. Mentally, I’m already buying land in New Zealand where, with Peter Thiel and other like-minded billionaires, I’ll be safe from the pestilence, civil unrest and war that will ultimately do for the rest of you.

Wish me luck!

Adrian Brown is a former lawyer who works in payments and foreign exchange, with experience across both the banking and financial technology sectors.