“Liberty is always unfinished business."
Title of American Civil Liberties Union Annual Report, 1955
The stand-off between capital and labour goes back to the start of economics as a field of study, and beyond: arguably it’s rooted in the mediaeval feudal system. It’s high time we move away from seeing a confrontation between these two vital ingredients of human progress, and towards a combination - so that all can share in the rewards of modern technology, and enjoy both wages and dividends.
That means extending share ownership throughout society - and these commentaries have frequently shown how to achieve that aim. But with share ownership comes a responsibility, to help steer the great engines of economic growth, and that means taking an interest in these companies - and voting.
The Law Commission wants to achieve much greater share owner participation, and a few days ago it published a substantial scoping report. So, in this commentary we take a look at their ideas and add some more, drawing also on our commentary of 29 May 2018.
The driver for The Law Commission’s work is share owner participation, but the outcome in their scoping paper appears heavily steered by the archaic registration industry. Even the title – ‘intermediated securities - who owns your shares?’ - seems to imply criticism of custodial administration: and yet the two great drivers for the existence of investment platforms are the need for services to be investor-centric, not company-centric, and HM Treasury’s requirements for tax-enhanced services such as ISAs, SIPPs, etc .. to be coordinated in a regulated account.
Investors need well-run, integrated services where their investments can be combined within an account together, and serviced by a standard, low-cost system - that’s why retail investment platforms play such an important role.
The major challenge for all concerned with share owner democracy is, however, to get people voting: and that applies just as much to those with their shares held on the company register as with those whose shares are serviced on an investment platform. It requires communication focused on individuals, not yards and yards of incomprehensible legal text.
In our commentary of 29 May 2018, we called for much improved communications and the nomination of a specific company board director for personal shareowners. More than two years before The Law Commission report, we also called for all regulated nominee operators to be required to provide share owner communication and to publish a best practice guide for their voting process. This could be achieved ’at a stroke’, without involving any law change, by the Financial Conduct Authority obliging them to operate either Part 9 of Companies Act 2006 or similar arrangements.
At Share Radio, we support moving to a more egalitarian form of capitalism and, in our commentaries such as ‘Dividends, not Space Rockets’ on 10 August, we called for a radical alternative to the current anti-trust proposals to break up tech giants by requiring them to repay the harvesting of their customers’ personal data with the issuance of shares. This would lead to an explosion of share ownership across the world, paving the way for that gradual transition from earned wages towards dividends.
However, that explosion in personal share ownership needs to be accompanied with a much higher extent of share owner participation, so that those new owners can help steer the strategy of the companies of which they now own a part. That means thinking much more creatively about opening up involvement. The lawyers must look beyond processes, they must also think about how to make communication more compelling, not just a sea of text.
We also need to think carefully about how to help personal share owners to develop their voting policies, in the same way as investing institutions design a structure through which their trustees or directors can provide guidance to their staff for voting execution.
And there needs to be a better provision for share owner resolutions and circularisations. These key elements of share owner democracy have already proved critical for moving the oil giants towards making fundamental changes in the face of climate change, and institutional investors have achieved major business model changes, as reported in our commentary of 3 April 2018. And they’ve gone further in setting up the Transition Pathway Initiative to measure change achieved as a result of these resolutions.
So, share owners can make a huge difference if they use their influence – you’ve just got to exercise your vote.
Gavin Oldham OBE