ShareSoc's Manifesto: promoting individual share ownership

Monday, May 09 2011 by
14
ShareSocs Manifesto promoting individual share ownership

ShareSoc, the recently formed UK Individual Shareholders' Society, has prepared a draft Manifesto that summarises the policies that we plan to promote. We would very much like to hear your comments on this document before we finalise and promote it more widely.

Full details of the manifesto can be found here. To participate fully in the debate, and if you support our aims, please join ShareSoc! Associate membership is free, though a donation to support our work would be very much appreciated.

The key points are: 

  • The control of companies should be restored to their owners.
  • Shareholder democracy should be improved.
  • The legal framework for companies should be changed to improve accountability.
  • The taxation of investment profits should be reformed to make it more equitable and reduce complexity.
  • Excessive pay of directors needs restraining.
  • Direct share ownership should be encouraged.
  • Information flow to shareholders should be improved, and a level playing field ensured.
  • Insolvency law should be reformed.
  • Stock market regulation and enforcement should be improved, especially for the AIM Market.
  • Investment education needs improving.

One way you can give us your comments is, of course, to attend the Member's Meeting to be held on the 19th May in London where it will be one item for discussion. Most of the ShareSoc directors will be present at this event to answer any questions you may have on the manifesto.

Mark Bentley

Director

ShareSoc

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Disclaimer:  

The author may hold shares in this company, all opinions are his own and you should check any statements that appear factual and not rely on them before making an investment decision. The author is NOT a qualified analyst nor authorised to give investment advice. Whilst the author is a director of ShareSoc, all views expressed are entirely his own and not necessarily those of ShareSoc.


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5 Comments on this Article show/hide all

nigelpm 9th May '11 1 of 5
3

Great stuff. Shall have a read through.

The bits that hit me right in the face immediately are:

Control should be restored to the shareholders of companies. Directors and auditors
should be both selected and appointed by shareholders via the use of
nomination committees consisting primarily of shareholders to put forward
appointees on which a vote is taken at a general meeting of the company.

I very much agree with the selection of auditors - it seems nuts to me that directors can choose their auditors RE: Enron/Worldcom. In an ideal world I would have auditors "assigned" to company's rather than chosen by their directors.

However, the problem with the control argument is there are so many stakeholders in play - employees/debt holders/banks/customers/supplier s- I thus think it a little strong to suggest merely shareholders have control given their pure reason d'etre is to maximise shareholder value.

Directors and auditors should have a duty to, and be legally
accountable to shareholders. The legal concept of “fraud against shareholders”
should be introduced in a new law to cover such matters as issuing false
information to the market or the prejudicing of minority shareholders, and
provide a basis for legal actions. And the legal system should be reformed so
that shareholders can pursue grievances at reasonable cost. In addition the
penalties for fraud should be increased.

Purely, assessing this from a auditing perspective, auditors already DO have a duty of care to all the shareholders as a body to detect material misstatement be it from mis accounting or fraud however ultimately they are reliant on the directors providing them with all the available information i.e. there is only so much they can look at and evidence that can be gathered.

Thus, I feel it is the directors who should be facing up to their responsibilities in a much more serious manner towards their owners and this is the avenue you probably should pursue.

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marben100 9th May '11 2 of 5
2

In reply to post #56330

Thanks for your comments, Nigelpm.

What has to be borne in mind, however, is that the shareholders are the owners of a company. The directors are their agents. Hence ISTM that directors must be chosen by the company's shareholders (who else should choose them?). Historically, this used to be the case and was clearly understood. What happens at present is that, very often, directors choose each other, leading to cosy cliques. Is it any wonder that events like the banking crisis, and the divorcing of directors' pay from those of "ordinary folk" happen under those conditions?

It is not only in the interests of shareholders but also of UK plc, that control by business's owners is reasserted.

This official document shows that as recently as1963 54% of UK shares were owned by individuals. By 2008, this proportion had fallen to just 10% - with 36% in the hands of financial institutions (including pension funds and insurance companies) and 42% in the hands of foreign owners (see Table A p4).

This drift explains a lot of the deterioration in practical standards of corporate governance in UK business. We will be campaigning hard to increase private ownership of shares and for institutional shareholders to face up to their responsibilities as business owners.

It won't be easy, but any progress we can make will be worthwhile.

Mark

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nigelpm 9th May '11 3 of 5
1

What has to be borne in mind, however, is that the shareholders are the owners of a company. The directors are their agents. Hence ISTM that directors must be chosen by the company's shareholders (who else should choose them?). Historically, this used to be the case and was clearly understood. What happens at present is that, very often, directors choose each other, leading to cosy cliques. Is it any wonder that events like the banking crisis, and the divorcing of directors' pay from those of "ordinary folk" happen under those conditions?

Couldn't agree more. I was debating your statement in the manifesto:

"Control should be restored to the shareholders of companies"

However, it would appear I misinterpreted it somewhat ;-)

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rvismith 3rd Feb '12 4 of 5

I totally agree with what you are trying to do.

Are you aware of the current shenanigans at Cosalt PLC? Is it something ShareSoc can highlight to it's followers, as this an example of the attempted trampling of small investors? Here's a quick bit of background.

The attempt to de-list Cosalt PLC (CSLT) by it's Chairman David Ross is being fought against by a large group of Private Investors under the umbrella of SORT (Stop the Oval-Ross Takeover), started on the lse.co.uk BB for Cosalt. We believe that Cosalt has a great future in it's current form and that the takeover proposal is against the interests of all Private Investors in the company.

We also have our own website www.savecosalt.com which explains the basic actions which shareholders can take. The lack of knowledge about voting rights has been raised by many shareholders.

We are also starting a campaign to get as many signatures as possible to an existing Goverment e-Petition on the LSE and III share boards, and I have started postings on Motley Fool and Stockopedia. All Private Investor's need to be aware of their rights. We are posting the following:

We have started a campaign to get as many signatures as possible to an existing Goverment e-Petition to raise awareness of this major flaw in the shareholding regulations in the UK. All Private Investor's need to be aware of their rights. We are posting the following:

ALL Private Investors please sign the Government e-petition entitled
"Restore Shareholder Democracy by Ensuring Nominee Account Shareholders are on Share Registers by Default":
http://epetitions.direct.gov.uk/petitions/16769

1. Do you vote at Company AGMs etc?

2. if No. Do you receive the voting forms?

3. if No. Do you know how to sign up for them?

4. if No. Do you believe company directors always look after your interests?

5. Do you believe you should automatically get voting rights for your shareholdings?

I hope that's got you thinking. If you said yes to the last question please sign the petition.

Lack of voting rights can seriously affect your wealth.

Pass this link to all Investors you know and we can try to change the system, those with the power and money won't choose to change it themselves.

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sirlurkalot 3rd Feb '12 5 of 5
5

Well done for making the manifesto available to read for those who don't want to register in their real name!

Some thoughts on your manifesto points:

1: Oversight shd be restored to owners. As I see it the problem with your concept of Shareholder Committees is what role the larger institutions are to have on the SCs. In response to the possibility of becoming an insider, you propose that institutions should have a chinese wall between those attending the SCs and the actual fund managers. This would require a sizeable team of SC attenders, adding cost, and it's far from obvious that that SC-attending team would actually have respect and good communication with the fund managers who might decide to sell the shares at short notice. Most probably the SC team would culturally end up seen on the front desk as a sleepy bunch of compliance officers to be ignored, so the whole structure would drift into pointlessness. There's also the issue of how individual private investors could deal with having a chinese wall between the SC part of their brain and the dealing part.

6. Direct ownership to be encouraged. Could you be more specific on what the tax advantages and privileges of institutions currently are that you would remove?

8. Info flow improved, level playing field. What if management wish/prefer/choose to meet with individual large shareholders alone? Would you ban any individual meetings with institutions at all? And if so, how would you define what exactly it is that you would ban - ie would a meeting in the back of a box at Lords or Wimbledon or an ordinary lunch in a restaurant be banned? What about the sort of phone calls that I imagine Carmensfella makes to all kinds of people related to/in a company? Effectively your manifesto can only be achieved by banning some sorts of meetings, and it's not clear exactly how you'd define what it is you'd ban.

I believe the way forward for info flow to shareholders should be much more towards electronic communications and video coverage of presentations, results meetings etc. To require a web presentation including slides, audio commentary and opportunity to ask questions after all results or sig events seems the most practical way forward.

10. Regulation improved, esp for AIM. IMO there is a market for fully regulated companies (the main market) and there is a market for light regulation which when it started up was thought of as simply a matched bargain trading facility for private shareholdings (AIM) in which there should be a much greater degree of caveat emptor. Your proposals appear to be heading in the direction of converting AIM into something similar to the main market - but if companies want to be on that sort of regulatory basis they would simply switch to the main market itself. IMO the solution to the quasi-frauds committed on AIM is for shareholders in those companies to realise that AIM isn't intended to be a fully-regulated market looking after shareholders, it is intended to be simply a trading facility for private almost-unregulated shareholdings. A recalibration of what regulation to expect, if you like. The whole point of AIM is that it isn't intended to have the full range of regulation of the full market, and that investment on it should be only for those willing to take responsibility for avoiding dodgy corp gov for themselves. If you don't like the almost-inevitable consequence of light regulation, then avoid AIM rather than expect AIM to have the same rules as the main mkt.

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About marben100

Marben100

I am a full-time private investor... with a little trading on the side (generally small-scale arbitrage in specialist niches). Previously, I spent 24 years in the IT industry, 13 of those running my own IT services firm. I invested as a "hobby" for 20 years before turning it into a full-time occupation in 2004. I really enjoy the "research" side of investing, finding out about varied businesses and industries and learning what makes them tick. Since going "full-time" I have learnt an awful lot from some very erudite investors & professionals who are kind enough to share their expertise in electronc forums such as this. I can now count a number of them as my friends, having had the opportunity to meet them in the real world, as well as this virtual one! I try to pay back the debt I owe by sharing what I've learnt and I always value constructive criticism to correct my errors and misapprehensions! I am a Director of ShareSoc, the UK organisation for individual shareholders. See below for details.     more »

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