‘YOU WORK FOR ME.’
Lewis Gilbert, Corporate Democracy Inc. (1979)
In our world in which global businesses run rings around national governments (largely because there is no global government), where so many corporations are controlled by private equity, and where the super-wealthy call all the shots in terms of power and influence, this blunt 47-year old statement from shareholder activist Lewis Gilbert rings as true today as it was then — in fact, even more so. He was referring to individual shareholders, but the same statement applies for customers, employees, fund investors and indeed anyone impacted by the businesses which drive our world.
I have been reading Merryn Somerset Webb's book ‘Share Power’ over the Easter break, and it reminded me so much of our drive to enfranchise nominee shareowners in 2006. I got a real surprise to find myself quoted on page 115, ‘If shareholders don't feel they have any say over the companies they own, then they are likely to challenge the whole basis of the system’.
It's our extraordinary capitalist system to which this refers — extraordinary, because it drives so much wealth creation; but it is also deeply flawed by concentrating that wealth and power among so few people. Merryn’s book title ‘Share Power’ says exactly what we need to do, and she has a number of strong recommendations for how to make it happen.
Even Larry Fink, Chairman and Chief Executive of BlackRock (which comes in for quite a bit of criticism in Merryn’s book) recognises the problem. On Tuesday 24th March The Times carried an article in its business pages headed, ‘AI risks widening inequality, warns Fink’. He argued that the solution was to try to increase access to capital markets so that ‘a greater share of the population could benefit from the performance of AI companies’. Without doing so, he warns that 'more and more people would feel that capitalism was not working for them'.
Share Alliance’s proposals for ‘Stock for Data and Creativity’ would certainly achieve that; so hopefully he will greet these plans with open arms.
Merryn Somerset Webb’s proposals for empowering shareowners include six key proposals:
1. Let anyone with investments use their votes — she draws attention to a number of major initiatives over the past few years which would enable this, including the Tumelo initiative for investors through funds;
2. More transparency and clarity of information on how voting power is exercised, particularly by intermediaries;
3. More access to annual general meetings and shareowner benefits;
4. Making the listing of companies on public markets much easier, by overhauling and simplifying regulations;
5. Changing the tax system so that it stops treating debt more favourably than stock issuance; this would encourage a major shift away from the dark world of private equity and towards accessible public markets; and
6. Require all companies to have one non-executive director responsible for engagement with ‘end beneficiaries’ — that is, individual investors in the widest sense.
It’s now twenty years since The Share Centre persuaded the previous Labour Government to enfranchise nominee shareowners, and Merryn Somerset Webb brings us right up-to-date with her book ‘Share Power’: it's thoroughly recommended.
But we want to go still further in order to tackle that challenge to which Larry Fink refers. However, it’s not just a matter of ‘increasing access to capital markets’. He rightly refers to AI as being responsible for widening inequality, and this calls for empowering not just investors but adult populations generally.
If there’s one area of business which really drives people’s interest and concern, it is the way that technology is literally changing the face of our society. It’s not that people are Luddite in their approach; they are certainly not. But they do want to exercise influence over how technology develops, for both their own sakes and for those of their children and grandchildren: ‘share power’ would enable that. Expressing views on the future of technology is likely, therefore, to attract significantly more shareowner participation than for businesses in more traditional sectors.
However, there is an additional dimension for technology which differentiates it substantially from businesses such as manufacturing, transport and service industries: technology absorbs personal data and creativity in huge quantities in order to harvest its immense capacity for wealth creation. But unlike patents which reward individual inventors, this data and creativity is currently taken free of payment. This is why Share Alliance is developing and researching its proposition for issuing equity shares on a widespread basis, in order to enable ‘participation for all’.
It will enable not only mass sharing in the wealth creation of technology but also direct participation in shareowner governance, and this is where some of the innovative routes researched by Merryn Somerset Webb could deliver real benefits.
On page 122 of her book she introduces Allison Herren Lee, a commissioner at the U.S. Securities and Exchange Commission who gave a speech in 2021 titled ‘Every Vote Counts’, and who is also open to exploring ‘the use of a permissioned blockchain to record beneficial ownership and execute votes’. This would cut through the layers of intermediaries between the technical ownership of a share and the company’s final beneficial owner.
Merryn also describes the progress made by Tumelo, a voter choice software firm which has teamed up with Legal & General Investment Management to discover the views of underlying investors and provide them with the opportunity for engagement.
As we have said on several occasions, a sense of ownership gives rise to a sense of responsibility. However, there must be the opportunity to experience this sense of ownership actively: ‘Share Power’ shows how this can be achieved. If it is not, people are indeed likely to challenge the whole basis of the capitalist system.
Gavin Oldham OBE
Share Radio