Millions of small shareholders locked out of voting against fat cat pay deals


Millions of small shareholders are locked out of voting against fat cat pay deals, boardroom bungling and controversial takeovers such as GKN.

Investors are demanding a rule change to restore Britain’s ailing shareholder democracy that threatens to stop ordinary investors from voting against City excess.

They have been locked out of exercising crucial shareholder rights simply because of a technicality in the rules. It has meant they often don’t know that they are allowed to vote on greedy pay deals such as those handed to Persimmon boss Jeff Fairburn, or the four Melrose executives who bought GKN.

Backlash: Martin Gilbert, Roberto Quarta and Pascal Soriot

Backlash: Martin Gilbert, Roberto Quarta and Pascal Soriot

Backlash: Martin Gilbert, Roberto Quarta and Pascal Soriot

And in many cases they can find their right to reject these deals and hold bosses accountable for bad behaviour is often denied.

Bids to get the rules changed to ensure companies are held accountable for their behaviour have fallen on deaf ears despite lobbying. Those facing revolts include Roger Devlin, chairman of William Hill, Sir Adrian Montague chairman of Aviva, Sir Roy Gardner at Serco, Martin Gilbert at Standard Life Aberdeen, and Roberto Quarta at WPP.

Meanwhile, Pascal Soriot, the chief executive of AstraZeneca, as well as bosses at Direct Line, Melrose and Rentokil, face revolts over their pay deals.

The shareholder lock-out has arisen because of the way people invest.

When someone buys a share they can vote at a firm’s annual general meeting on directors’ pay and the appointment of board members.

Previously, everyone would buy shares through a stockbroker. The share though would be held in the individual’s name, and all paperwork, including the share certificate and information about the annual meeting would be sent to them.

However, the rise of internet trading platforms such as Hargreaves Lansdown has made it harder for people with a stake in large companies to vote.

This is because, essentially, the trading platform buys and owns the share on behalf of the investor, who does not have their name on it and receives no documents. Instead, the nominees are the legal owners of the shares and their names appear on registers.

So when votes come around there is no way to hold companies accountable. Instead, big corporations and insurers vote on behalf of investors.

Around 12 per cent of listed shares were held by the public in 2016, according to the Office for National Statistics, equivalent to around £232bn of the FTSE 100.

It is thought a very large proportion are held through nominee accounts – Hargreaves has more than 1m active clients.

Peter Parry, from the UK Shareholders’ Association (UKSA), said: ‘The system is not helpful for shareholder democracy. The ultimate owners of the shares – the public – should be the ones who get the information from the company and be able to vote.’

Although technically investors are able to claim their voting rights, they are often not sent information about when annual meetings are being held, and shareholders must write to their platform to request the ability to go and vote.

The UKSA said some investors were charged for arranging for them to exercise their rights. Hargreaves, AJ Bell and Barclays say they do not charge, and Hargreaves said under 1 per cent of investors ask to vote.

There are plans to changes EU rules on shareholder rights so investors using a nominee must be told that they can attend a general meeting and vote.

But the Government’s position is that nominees themselves are the legal shareholders, meaning ordinary investors could still be denied their rights. 


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