Is ‘inclusive capitalism’ – a return to individual share ownership – the way forward? STRICTLY BUSINESS debate
The Acid House, a film based on three short stories by Irving Welsh of Trainspotting fame, is perhaps not the most obvious place to look for insights on popular capitalism.
Boab Coyle, one of the leading characters, is having a terrible day: he is booted off his football team, evicted from his parents’ home and, when he calls his girlfriend from a payphone, she dumps him.
Our dejected anti-hero vents his anger by wrecking the phone box, whereupon he is beaten up by a police officer, who is furious at the vandalism because he holds shares in BT.
Fortunately, very few small investors would feel such a visceral sense of ownership.
The problem, four decades on from the privatisations of the Thatcher era, is the opposite: small retail shareholders are increasingly detached from the companies they own.
Private investors were once a real force, with genuine influence in boardrooms.
Sixty years ago, individuals owned 54 per cent of the UK stock market. By 1981 this had dwindled to just under 30 per cent and by 2020, the latest figure available, it had fallen to 12 per cent.
It matters – a lot – that the links between UK companies and small investors have weakened in recent years.
The narrowing of share ownership has co-incided with a more divisive and angrier variant of capitalism and more fractious relations between businesses and society.
So all credit to Archie Norman, the chairman of Marks & Spencer, who as we reported in the Mail on Sunday, has launched a ‘Share Your Voice’ campaign to promote shareholder democracy.
Some of his proposals will be provocative. The most eye-catching is to allow companies to hold digital-only shareholder meetings, which would deprive some agm addicts of their hobby of berating the board then tucking into free food and drink.
The decline of the agm, which has provided a stage for some great corporate theatre over the years including at M&S, is a great shame.
Something is certainly lost if shareholders cannot question directors in person, and we should not forget that not all investors are comfortable with technology.
Online events, however, are more inclusive for those who cannot travel or take time off work, and probably less intimidating for shareholders who do not relish public speaking.
Perhaps a hybrid of physical and digital is the way forward.
Few would argue with Norman’s points on nominee accounts, however. Most of us now buy shares through nominee platforms, meaning that in most cases, we have no automatic right to attend the meeting, to vote, or even receive information from the company.
This amounts to a mass disenfranchisement.
As Norman correctly points out, digital innovation ought to be harnessed to break down these communication barriers.
Companies spend a lot of time and effort engaging with large investors. It is the same with activists and hedge funds, which are often noisy but do not always have a real ownership stake, let alone a genuine long term interest.
Building a relationship with small investors, whether through annual meetings or digital communication, could be beneficial in a number of ways.
Their views would be an astringent antidote to boardroom bubble syndrome.
Individual shareholders have a direct and personal interest in the company. Often, they are long term holders, in contrast with institutions who are professionals playing with other people’s money.
Retail investors are more likely to be animated by poor strategy, defective governance and fat cat pay than fellow members of the City club.
In the Square Mile there has been a great deal of hand-wringing about London markets losing attractiveness in comparison with the US.
The reasons for this are varied and complex, but it seems to me reasonable to speculate that one factor in the US ascendancy is the vibrant small investor culture on that side of the Atlantic.
Sometimes this is over-exuberant, as we have seen with the tech stocks and with crypto, but it is part of an aspirational and enterprising value system that can seem lacking here.
We lose the power of the small investor at our peril.