Who owns large UK companies? We do, and those of us saving for our retirements should become more active owners of the company which our pension fund holds.
Roughly 12 per cent of shares of the companies listed on the UK stock market belong to us.
It used to be 40 per cent, but now our money has gone global.
Power to the people: Share owners can and should cast their votes at meetings
Our pension investments are for the long-term, both during the savings process – we may be working for 50 years – and once we retire, as we may live well into our 80s. So we need to ensure our money is being looked after by people who are acting in our best interests and who are prepared to consult and engage with our views.
Each share we own through our pension comes with a democratic right and responsibility, yet our voices go unheard and our voting preferences are not sought.
Share owners can and should cast their votes at annual meetings, on such matters as the pay and the election of directors.
The question is: who is casting your votes? Who is talking to the directors of your companies and encouraging them to work in your long-term interests?
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Unfortunately, the answer is that there is likely to be a chain of people between you and the companies you own. These intermediaries are often more focused on the short-term performance and trading of shares rather than in the good ownership of UK plc.
The chain starts with the trustees of your pension fund, if it is a workplace one, or if you have a personal pension, the directors of a bank or insurance company providing your savings product.
Both have a duty to invest your money in your best interests, which should include activating your ownership rights. The trustees and directors entrust money to fund managers, where good ownership or stewardship of companies may be ignored.
We depend on the success of companies not only for our pensions but to act as the engines of jobs and growth in our economy. So it is vital that they are supported throughout the chain of ownership, through the relationships between trustees, fund managers and company boards.
While pension fund trustees are not involved in investment management day-to-day, they set the terms under which fund managers operate and retain or delegate the responsibility for company stewardship.
Trustees also draw up mandates and payment agreements for fund managers in order to monitor and report to scheme members on the fund managers’ performance.
We the scheme members are the ultimate beneficial owners of fund assets. But unless our trustees formally mandate the fund managers to adhere to best practice and to reflect our interests, then we suffer a democratic deficit. Effectively, companies are ownerless and acting without our stewardship.
Our pension pots have been hit by a series of economic recessions and crises, which can be linked to a lack of ownership and stewardship of the companies we invest in, such as banks.
Rather than being accountable to us, the banks were focused on dancing to the short-term tune of the financial markets.
It is time we took some control back over our money and the power it has, for our benefit and society’s wellbeing. As part of our recovery from economic crisis, we need to ensure that our views and interests are represented to companies. To take one example, we, the owners, could be polled for our views on boardroom pay.
With the availability of mobile phones, the internet and social media, there is a very real opportunity for us to vote directly, or register our views with those acting on our behalf.
You could ask your pension fund or savings provider to sign up an expert in company engagement.
Hermes Equity Ownership Services already works for pension funds, representing them as good corporate owners. It would be great if we could work directly for pension fund members.
