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Share Power by Merryn Somerset Webb — held to account

We love investing in shares. Whether directly through individual savings vehicles, such as ISAs, or indirectly through our personal or workplace pension plans, tens of millions of us are invested in the stock market.

Not that you would always know it. Over the past decades individual investors have become a less visible presence on company shareholder registers — and a less vocal one. The proportion of shares held by individuals in the UK today is 13 per cent, down from 66 per cent in 1957, and most of us own shares inside funds.

Even when we’re technically the owners, we have delegated our rights to the big players. The asset management industry is dominated by titans managing trillions of dollars. Capital is now increasingly concentrated on a small group of players, leaving private investors often marginalised.

With this loss of control comes a feeling of disempowerment. Far too many of us feel disconnected from how the companies we invest in are run. More broadly, this threatens to undermine support for shareholder capitalism.

It is time then, FT investment commentator Merryn Somerset Webb argues, for private investors to get active, reclaim their powers and in the process get a better return on their investments. This is the premise of Share Power, her concise and enjoyable read that offers both a timely overview of the situation as well as proposals for how to fix it.

Shareholder activism has become an increasingly powerful force in corporate life. Highly mobilised investor groups with a particular agenda — higher returns, sharper strategic focus or concerns for environmental or social issues — are a familiar feature in many boardrooms. But they are “big players”, the professionals. Individuals have been less active, though that could now change.

Technology is definitely part of the answer, writes Somerset Webb, as it allows fund managers to hand the votes on our shares back to us. But she adds that there are a number of simple, small steps that investors can also take to ensure they have a greater say in the businesses they ultimately own. These include being more visible and vocal by banding together in grassroots shareholder activist groups or engaging with investment platforms, fund managers and even local politicians.

Companies and regulators need to act too. Among the changes Somerset Webb calls for are making it easier for private investors to use their votes with clear, transparent information that is available to all and giving incentives to people to attend shareholder meetings. More companies should be encouraged to list on the stock market with direct allocation and a better tax regime for those selling shares (as opposed to more favourable tax treatment of debt).

Given how busy our lives are, it can at times all seem a bit overwhelming. The author writes persuasively about how powerful fund managers are. Yet that can only make the mountain that needs to be climbed appear even more daunting. Yes, technology is here to help us and can certainly make voting more accessible, but integration can sometimes be limited. It is also important to consider that a lot of investors don’t pretend to be activists, and feel too disconnected from their investments. Others might have different priorities altogether.

As Somerset Webb herself asks, do we really know what we want? We want to diversify our investments to reduce risk and, for most investors, “setting it and forgetting it” is an easier route to long-term balanced portfolios. So how do we encourage investors to stay active and in touch with a number of companies?

Given the rise of huge fund management groups on the one hand, and well-organised shareholder activist groups on the other, retail investors who care about capitalism — and about their returns — need to have a bigger voice, as the author rightly notes.

Share Power is a very useful guide and contribution to a bigger argument. But it will need regulators, asset managers, boards and investment platforms to make sure they take a big, long-term commitment to realign ownership with stewardship to ensure that shareholders’ voting power is aligned with their economic interests. We should remind ourselves that, as per the subtitle of the book, we “ordinary people” can make money too. Let’s make sure we don’t miss this opportunity to make capitalism work for all.

Share Power: How Ordinary People Can Change the Way that Capitalism Works — and Make Money Too by Merryn Somerset Webb, Short Books £9.99, 208 pages

Emilie Bellet is the founder of Vestpod and author of ‘You’re Not Broke, You’re Pre-Rich

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