Why small investors must have their say

THE Mail today launches a campaign to give thousands of savers who own shares online a fair say in company votes.

Investing is quicker, cheaper and more popular than ever due to internet platforms such as those operated by Hargreaves Lansdown, Charles Stanley Direct, AJ Bell and Barclays Smart Investor.

But there are fears the shift to the web may unintentionally be undermining shareholder democracy.

This was highlighted by the recent row over Unilever’s aborted plan to move its headquarters from London to Rotterdam.

Ordinary savers who hold stock in large firms are entitled to vote on corporate matters, including their bosses’ pay – but those who hold stock online often miss out. Unlike savers with traditional paper share certificates, many online investors do not realise votes are happening and may not know how to take action even if they want to.

In crucial votes at the likes of Unilever, the system has limited online investors’ rights. The Mail is calling for reform to voting rules so that all shareholders get a fair say.

We want the votes of online investors to be treated in the same way as those who own stock through certificates. They should not be charged any money by their online platform to register a vote.

And we are calling on big businesses to set up simple online voting systems so that any investors can easily make their voice heard.

Stockbrokers, trade groups and MPs last night backed the campaign. Gavin Oldham, chief executive of online platform The Share Centre, said: ‘This is absolutely fundamental. 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.’

Mark Northway, chairman of retail shareholder group Sharesoc, said: ‘The ability of shareholders to exercise their rights, and the ability of companies to contact their shareholders, is absolutely essential.’

John Barrass, deputy boss of financial adviser trade group Pimfa, said: ‘Owners of the same classes of equity in a company have the same rights as each other, regardless of the size of their holdings.’

Unilever’s plan to have a sole legal base in the Netherlands triggered an outcry over shareholder rights this month.

For the firm to get its plans passed, it needed support from more than half of individual investors who voted. In theory this gave ordinary shareholders an equal say to giant pension funds.

It emerged, however, that the company would only count online brokers such as Hargreaves Lansdown as a single investor – even though they looked after shares for thousands of people.

Hargreaves had 20,000 clients with Unilever stock – but they would not have been counted separately.

This is because online platforms look after all their customers’ stock collectively in a so-called nominee account.

Unilever eventually called off the vote and abandoned the scheme following the backlash. But campaigners have warned that the voting rules should be changed so that individual shareholders get an equal say in all future votes.

Labour MP Wes Streeting, a member of the Treasury Select Committee, said the system is hard to justify. He added: ‘It risks disengaging huge numbers of shareholders in all sorts of businesses and it’s something Parliament, the Government and regulators ought to look at very seriously.’

Danny Cox of Hargreaves Lansdown said: ‘Nominated shareholders should have the same rights as certificated shareholders.’

Andy Bell, chief executive at AJ Bell, said: ‘We can enable our customers to cast their votes online, but this is futile if there is a barrier to those votes counting.’

A spokesman for Barclays Smart Investor said: ‘Any effort to provide more simplicity in the process is something we would greatly welcome, on behalf of our customers.’