ctivist” professional investors take significant stakes in firms and use their position to pressurise companies into making changes, but shareholders don’t need billions at their disposal to push for a shake-up.
Recent years have seen more of this kind of activism in Britain, as investors have flooded in from America, and the methods they use have become increasingly sophisticated.
At any one time, a number of companies are likely to be in activists’ sights.
Right now, both Barclays and BHP Billiton, the mining giant, are in showdowns with different activists who have bought around 5pc of the shares and are gaining support to push for significant change. Royal Dutch Shell has faced repeated shareholder revolts over executive pay.
Here, Telegraph Money explains the ways in which individual investors can exercise their rights as shareholders and carry out their own form of activism.
Shareholders have the right to attend, and ask questions at, any formal meeting (such as an annual or extraordinary meeting) and to vote on any decisions that are put to them.
Adrienne Monley, European head of investment stewardship for fund giant Vanguard, said: “Votes tend to follow common themes, such as board of director elections, approving audit reports, executive pay, and sometimes issues put on the ballot by significant shareholders such as asking for increased disclosures or greater board diversity. The business strategy of a firm is not something put to a vote.”
Although an individual’s voting power is dwarfed by that of large institutions, there is still potential to apply pressure. In particular, individual investors who are also customers of a business can have greater impact.
Richard Stone, chief executive of the Share Centre, an investment shop, said: “What retail investors have to their advantage is their number rather than the number of shares. Some companies will look at how many people vote instead of the number of votes. For instance, if three big institutions vote for something but every small shareholder is against it, that could make a company listen.”
Annual meetings in particular are an opportunity for small shareholders. “If 10,000 people turned up at a Sainsbury’s AGM they would clearly make their presence felt, make a news story and put pressure on the company’s board,” said Mr Stone. Most investors now own shares via an online investment shop, but not all of these services allow shareholders to exercise their rights.
This is because such investments are held on a “nominee” basis – the investment shop itself is the shareholder.
The Companies Act of 2006 extended the full rights of shareholders to nominee shareholders, but it is up to investment shops to decide whether to facilitate this. Some don’t, so investors should choose carefully.
“It’s not that difficult to do. We exchange information on a monthly basis with the share registrar, so our customers are treated as if they were a name on the register,” said Mr Stone.
Customers of Hargreaves Lansdown, Britain’s biggest investment shop, can request to attend a meeting and vote, or can send a voting instruction by email or post. Interactive Investor allows investors to opt in free of charge to receive all shareholder materials and to vote, while customers of AJ Bell and Barclays Smart Investor can ask for the right to vote or attend meetings. Some investment shops may charge for such services, and the deadlines for making a request are likely to be in advance of any meeting or vote.
With fund investments, it is up to the fund’s manager how he or she wishes to vote on issues at any of its holdings.
You can still contact the fund management company and voice your opinions; some will be better at taking them into account than others. Many fund houses publish information online about their voting activity at the companies they invest in.
Some go a step further and provide detailed information on their voting policies. Vanguard, for instance, explains how it makes voting decisions and with what aims in mind.
For particularly keen investors, there are organisations that represent individual private shareholders. The UK Shareholders’ Association and ShareSoc speak for individual shareholders, mount campaigns, talk to regulators and launch action groups.
BHP Billiton, the mining group, is among the companies to be targeted by activist investors