Shareholders can hold a company to account

Ever wanted to hold to account a company you invest in, but didn't know how to go about doing it? Simon Read shows how individual shareholders can make their voices heard

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The Independent Online

If you invest in a company, you become one of its owners and earn the right to have a say in how it runs its business. But few people take up the chance to tell bosses what they think.

That's especially true when firms are involved in unethical activities such as child labour, tax evasion or pornography.

While seven out of 10 investors said they would like to voice their concerns, most don't know how to, according to research by The Share Centre, while four out of five people don't know their rights as a shareholder.

Gavin Oldham, executive chairman at The Share Centre, said: "Owning shares is not just about being another number in the room, investing at the right price and releasing a profit. It's also about owning part of the business.

"There are many personal shareowners that want to play a more active role in their company's governance, in order to match their values, but don't know how to do so.

"There are also a large number who simply don't understand what their rights are. Bridging this knowledge gap is crucial to giving them a stronger voice in running the business they own."

There is a growing number of activist shareholders who regularly turn up to annual general meetings to protest or to ask searching questions.

This summer, bosses at the likes of BT, G4S, Experian and Severn Trent faced grillings at their AGMs. At BT, complaints were about the company's poor customer service and at Severn Trent, shareholder revolts revolved around senior executives' pay awards, while at Experian almost a third of shareholders voted against the election of a new chairman

At G4S complaints centred on the security company's poor human rights record in South Africa, Palestine, the UK and elsewhere. In fact around 25 protesters were forcibly removed from the meeting.

They had been highlighting the company's role in the death of Jimmy Mubenga, an Angolan migrant, in 2010, as well as allegations of torture and beatings by G4S guards in a South African prison and an Australian migrant-detention centre.

Meanwhile British Gas has long been a target of shareholders unhappy about soaring pay packets accompanied by ever- increasing home energy bills. Last year an army of pensioners and disabled people attended its AGM to complain.

The big banks have faced severe shareholder scrutiny in recent years from people angry at their big bonuses or unethical investments.

If you want to change things at companies you invest in, you must secure support from other shareholders. If you want to raise a resolution, for instance, you'll need to own 5 per cent of the issued share capital or be able to get 100 shareholders together with a holding of at least £100 each to support your resolution.

But you don't need to go that far to make an impact as a shareholder. Even if you hold just one share in a company, you have the right to ask a question at an AGM. Such a move can make bosses aware of your unhappiness and, hopefully, force them to address it.

That's what the campaigning MP Tom Watson did a few years at the AGM of News Corporation. In a blaze of publicity he flew to Los Angeles to question the chairman, Rupert Murdoch, about the phone-hacking scandal.

The celebrity chef Hugh Fearnley-Whittingstall has also been an activist shareholder. In 2008 he went to the Tesco AGM in Solihull to put a resolution demanding improved standards in chicken-rearing.

Even if you don't own shares directly, you may still have a stake in many companies via a pension scheme. Most of these funds invest in blue chips, so your future may depend on how well they are run.

The ShareAction campaign group runs training camps to help people planning to ask questions at AGMs. Go to shareaction.org.

Case study: 'We could group together'

Investor David Wilson, 33, wants to bring back 'people power'

I started investing in October 2008 when it seemed a good moment to buy shares in Dixons. That started off what has turned out to be a major hobby and I now own shares in around 35 companies."

I take plenty of time to research companies and markets before buying or selling, and in the process have become increasingly interested in shareholder rights.

Most shareholders don't know what they're entitled to. I've been to quite a few AGMs now and its an interesting experience. They're mainly geared to the big institutional investors as they own more shares and so yield greater power.

But individual investors have just as much right to have an understanding of what's going on at the businesses they've invested in.

People are quick to turn to social media to rant about firms, but if they become shareholders they have the right to challenge the company directly.

I reckon investors could group together and send one member to an AGM. We should use people power to remind companies that we put our money in too."

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