You can see some potential pitfalls - it could result in cases not different in principle to hedge funds borrowing stock in order to have more firepower at company meetings. But then in that sense why is the investment management industry kicking off about it - this already happens, but not only is the voting right transferred, but the borrowed stock is often bet against the company (shorted). In addition, given the nodding dog nature of a number of fund managers in respect of voting outcomes, I'm not sure why they would be worried about losing the right. And clearly there is no suggestion of being forced to sell voting rights.
The key question is whether it would aid engagement with companies or not. I can't quite see the answer here. You can see that in contentious cases (trying to eject a director, or garner support for a resolution) then the ability to add to your voting clout might be quite an attractive option. If inactive managers were willing to loan out voting rights it might well shake up the market, as well as make clear once and for all who really isn't interested in being an owner. So whilst it's not an initially appealing idea, this is one to think about some more I reckon.
PS. I also agree with Lombard's take on things -
What is useful is the extent to which Preacher Paul's sermonising is stirring things up. It may be the best way of guaranteeing, via Sir David Walker's review of governance, that less radical ideas to promote investor activism make progress. Certainly, elected City ministers of the past - Ed Balls, say - were never this provocative.