“The best time to plant a tree was twenty years ago. The second best time is now.”
Anon
Last Friday the first SHARE conference took place in Cambridge, as advertised in this commentary for the past few weeks: we hope to provide links to the video recording next week. It was a lively gathering, particularly in respect of the number and range of comments, questions and suggestions which will provide plenty of academic food for thought over the months ahead.
The two propositions which were highlighted at the event were Inter-generational Rebalancing and ‘Stock for Data’. In the penultimate session on Building Momentum, Dr. David Good described the former as at ‘Societal Readiness Level’ 4 out of 9, whereas he suggested that the latter was at Level 1-2, with a long way to go.
There was widespread agreement that the capital receipts inherent in inter-generational rebalancing must be accompanied by life skills — education/information — if starter capital accounts are to be transformative, and it was helpful to hear how, in addition to establishing pilot activities for research, this must also be the case for ‘Stock for Data’: something which has not received much focus as yet.
In the United States, Charles Schwab may continue to bring Wall Street to Main Street and Motley Fool Money may draw out the contrast between gambling and investing (as in one of this week's programmes); but, in the United Kingdom, the rather timid efforts at publicising retail investment services since the absorption of The Share Centre into abrdn have been eclipsed by the cost of living crisis.
The audience at the SHARE conference is right — we need widespread understanding of stock ownership if concepts like ‘Stock for Data’ are to take hold, and this may also help us to establish those pilot activities for research.
One member of the audience reminded us that the most populist of all the Thatcher privatisation issues — British Gas, together with its ‘Tell Sid’ promotion — was scarred by the high proportion of participants who sold their shares immediately after receiving their apportionment, largely because they didn’t understand the benefits of continuing to own them.
He was right — I recall my criticism of the then Government’s extensive use of service registrars to administer these huge issues. The registrars had no interest in developing these new share buyers into steady-state investors, since their client was the issuing company, whose prime interest was to reduce the administration costs incurred by having large numbers of stock owners on their register.
The Thatcher Government should have used retail investment firms to handle these issues, but it took Michael Walter’s editorial after the BT2 issue in the Daily Mail on 10th August 1991 ‘Fat cats get the BT cream’ to break the status quo in time for the BT3 issue — and, by that time, the only other companies in the queue for privatisation were electricity and water companies.
The lesson for initiatives such as ‘Stock for Data’ is, therefore, that you can't expect stock issuance to mean anything unless it's accompanied by education and information. That has to cover the benefits of long-term ownership for both capital gain and income, and the significance of playing a part in the governance of the company in which you hold stock.
The need to build this understanding is well understood in employee share ownership: David Howden’s Times article on the merits of employee ownership on last Wednesday 12th April bears witness to this. It’s about nurturing the essential link between ownership and responsibility.
Share Radio has played a major role in investor education over the past eight years, with its radio-based production of the Open University’s ‘Managing My Money’ course. This now plays a central role as Step 5 in The Share Foundation’s Stepladder Plus incentivised learning programme for young people in care, and Episode 10 is focused on building an early-stage understanding of investment.
We’ve also promoted ShareSoc’s programme of ‘Investing Basics’, a ten-episode course for entry-level personal investors presented (as with Managing My Money) by Glen Goodman. Meanwhile The Share Centre had a student investor education programme called ‘Shares4Schools’ which was particularly effective because it involved real, not virtual, stockholdings.
We will continue to explore simple and straightforward ways of explaining the benefits of long-term stock ownership, linked with the logic for enabling capital gains and dividends from equity stock holdings to gradually replace the reducing availability of traditional employment as technology, including Artificial Intelligence, takes hold.
There are, however, other things to understand about equity stock ownership: in particular, its role in enabling involvement in the governance of companies. The Share Centre played a central role in ensuring that custodial-based stock ownership was properly enfranchised with its successful campaign resulting in Part 9 of the Companies Act 2006. Our commentary on 29th May 2018 ‘Shareowners must vote — and be able to vote — to make their voice heard’ explains the progress that has been made and the importance of individual stock owners having and using their influence.
Companies and their agents need to work actively to raise the visibility and significance of personal stock owner involvement, especially when their customer base is comprised of those same individuals. There is much work to be done in this area as we move towards a more egalitarian form of capitalism, with participation for all.
Gavin Oldham OBE
Share Radio