FEAR OF FINANCE

Not for the first time, Cedric Brown hogged the headlines at British Gas this week, but his retirement package obscured a rather sinister remark by his chairman, Richard Giordano, who complained that the privatised giant has too many small shareholders.

What, I wonder, did he mean, and more importantly, what does he intend to do about it? Buy their shares back at a premium perhaps, or give them a bum deal when British Gas is split and leave them with the unprofitable retail arm of the company while the fat cats and the institutional shareholders make off with the profitable exploration and transmission business? We should, in the immortal words of Sir John Junor, be told.

It is easy to see that the several hundred thousand small shareholders, the survivors of the million or more Sids who put up their money for a punt on a share issue in the Eighties, are a nuisance to the company. They need to be sent a dividend cheque twice a year and some form of report and accounts; the cost in postage alone is substantial.

But supporters of shareholder democracy may be slightly uneasy in case Mr Giordano is also objecting to the possibility of massed ranks of shareholders turning up at meetings and disrupting the proceedings with rude protests about fat cats and their salaries. Companies are not true democracies because the small shareholders are easily outvoted by the big institutions, but it would be a pity if the voice and the interests of small shareholders were diminished even further.

Small shareholders have every right to express their disappointment at the performance of British Gas shares in recent months. The company has stumbled over the massive long-term contracts it agreed to buy gas at prices now well above the market, and shareholders have a right to know why these contracts were not re-negotiated or hedged before the situation reached its current stage.

Mr Giordano's remarks also run contrary to the ethos of good company practice, which has in the past welcomed the presence of a large body of small shareholders, especially employees, taking an interest in the firms that provide their jobs and pensions.

The Government also has an interest in the outcome of the debate. Shareholders accept risks in the hope of rewards, but the Government led them into shareholding and actively encouraged them to go in not just for a punt but for the long term.

On balance, investors with a portfolio of privatisation stocks should be quite pleased with returns they have had over the years.

But human nature being what it is, shareholders in British Gas who have had a bad experience over the past year, will remember the bad times more than the good, and add it to their sense of disillusionment with the Government's overall economic performance.

If it is saddled in the public mind with responsibility for a collapsed property market, negative equity, the hyping of personal pension plans that led to mass mis-selling and also for leaving small shareholders in British Gas in the lurch, the Government will stand no chance at the polls, even if every member of the shadow cabinet is regularly exposed as saying one thing and doing another.