Derek Pain: Small shareholders are treated disgracefully

No Pain, No Gain

It is widely accepted that small shareholders get a raw deal. They are regarded as third-rate investors, unworthy to clean the shoes of the powerful institutions which dominate proceedings in the City.

I cannot see any improvement occurring until the Government, what ever colour, is prepared to take a more active role in considering the position of buy and hold individuals who are prepared to sink some of their often hard-earned savings into equities.

The UK Shareholders' Association, representing private investors, is, not surprisingly, appalled at the treatment handed out to us little'uns who now account for 10.2 per cent of the stock market. Our direct influence has declined dramatically. When statistics were first compiled in 1963 we accounted for 54 per cent. Even so the 10.2 per cent figure, struck in 2008, represented a not inconsiderable £117.8bn.

The growth of various funds and trusts has reduce the declared holdings of individuals. Yet, paradoxically, many of these powerful institution are merely stewards of other people's cash. The emergence of on-line nominee accounts has also contributed to the decline.

The only time small shareholders enjoy the influence they deserve is when a closely fought battle, usually a takeover, erupts. Even then if they can be discounted they will be.

Its quite possible that some of our blue chip companies – such as confectioner Cadbury – would have survived foreign assaults if private investor votes had not been swamped by hedge funds and other short-term institutions. As Derek Miles and John Hunter, authors of a UKSA booklet called Responsible Investing, say: "Collectively, they have certain qualities not always present in other shareholders. He and she are the ultimate shareholders for the long-term. They think like owners and have an owner loyalty."

And they go on to echo many of my thoughts. "Individual savers and investors have been treated disgracefully... viewed as fodder for the extraction of value by the financial services industry."

Investors have been "disenfranchised and ignored" and the diminishing freedom of small shareholders to manage their interests "is close to scandalous and must be challenged".

One response could be shareholder committees. I suppose such organisations could only be attached to major companies – say the top 350. Shareholders could not impose actions on the company but could make their views known, internally and externally. I suspect such committees would not be viable in the small cap world.

Other UKSA suggestions include the need for regulators to provide more shelter for shareholders from exploitation and mistreatment and the removal of discrimination against individuals stuck in nominee accounts.

The current crop of nominee accounts, supported by government schemes such as ISAs, is totally unsatisfactory. Run mainly by stockbrokers for both buy and hold investors and active traders, they block direct contact between shareholder and company. For example, in many accounts a shareholder is not even entitled to the company report. Often dividends are rolled up, distributed when seen fit.

The UKSA also has a swipe at the exorbitant levels of directors' pay – "an executive director of even a second tier company would consider himself poorly rewarded if he did not get more than the Prime Minister as basic pay, with bonuses and options on top". Indifferent institutions, content to develop their own agendas, must shoulder much of the blame.

I have criticised private share placings on numerous occasions. The UKSA appears to prefer old fashioned rights issues saying that pre-emption rights should be preserved. Placings, which are becoming increasingly prevalent, are, I believe, unfair. Most shareholders are denied participation with just a privileged few, including directors, invited to take part in a share sale at below the then stock market price.

With a general election looming the UKSA broadside is well-timed. But I doubt if much support will be forthcoming from politicians. After all shareholder rights is not an obvious vote winner. But I am disappointed, although not surprised, that an organisation representing individual shareholders does not support the retention of paper share certificates which have existed for 500 years and provide indisputable proof of ownership.

The last estimate I saw was that seven million shareholders remain on the paper trail. They do not want to suffer the vagaries and dangers of the internet; they prefer the obvious comfort of certificates.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

News
news
Sport
Lewis Hamilton with the Santander trophy after winning last year’s British Grand Prix
F1It's the race organisers who are to blame, apparently
News
peopleFormer Disney CEO isn't going to win any fans with this quote
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Assistant / Buyer

    £15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    Day In a Page

    Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

    Is this the future of flying?

    Battery-powered planes made of plastic, and without flight decks
    Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

    Isis are barbarians

    but the Caliphate is an ancient Muslim ideal
    The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

    Curse of Brink's Mat strikes again

    Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
    Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

    'The ministers talk to us about miracles'

    Why Greeks are cynical ahead of the bailout referendum
    Call of the wild: How science is learning to decode the way animals communicate

    Call of the wild

    How science is learning to decode the way animals communicate
    Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

    'The economic collapse has happened. What is at risk now is democracy...'

    If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
    The science of swearing: What lies behind the use of four-letter words?

    The science of swearing

    What lies behind the use of four-letter words?
    The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

    The Real Stories of Migrant Britain

    Clive fled from Zimbabwe - now it won’t have him back
    Africa on the menu: Three foodie friends want to popularise dishes from the continent

    Africa on the menu

    Three foodie friends want to popularise dishes from the hot new continent
    Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

    Who will fill Donna Karan's boots?

    The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
    10 best statement lightbulbs

    10 best statement lightbulbs

    Dare to bare with some out-of-the-ordinary illumination
    Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

    Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

    Briton pumped up for dream meeting with world No 1
    Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

    Nick Bollettieri's Wimbledon Files

    It's time for big John Isner to produce the goods to go with his thumping serve
    Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

    Dustin Brown

    Who is the German player that knocked Nadal out of Wimbeldon 2015?
    Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

    Damien Martyn: 'England are fired up again, just like in 2005...'

    Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test