May 3, 2013 6:17 pm

How to be an activist shareholder

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Barclays©Getty

A protest against senior management pay outside Barclays' annual general meeting in London last year

The annual meeting season is underway. The business pages are full of articles about over-generous bonus awards, egregious long-term incentive packages and knife-edge shareholder votes. And shareholder democracy is on the march; already this year, the Swiss have voted in a referendum to enforce binding votes on pay, while Spanish and French politicians look set to enact similar laws and binding votes will become mandatory in the UK later this year. But if you hold shares in a company – or a fund you own does – how do you actually make your views known and cast your vote for or against? Here’s our guide to shareholder activism.

Stay on top of the issues

There’s lots of heat and light in the press, but how do you know when a pay package or incentive plan is really unfair? Big institutions rely on proxy voting services such as ISS and Glass Lewis, to offer advice on what’s acceptable and what isn’t. But Rob Hardy, head of corporate governance at JP Morgan, notes that both are subscription-only and don’t really cater to smaller investors. There’s the Association of British Insurers (ABI), which issues alerts on corporate conduct at bigger UK companies, although it usually stops short of making actual voting recommendations. Pirc, a corporate governance consultancy, also offers views on bigger companies while Manifest, a smaller proxy voting agency, runs a blog that occasionally highlights corporate governance failings. Organisations representing small shareholders also run campaigns against things they believe are disadvantageous to the ordinary investor; the two main ones are the UK Shareholders Association and ShareSoc. Occasionally, single-issue shareholder action groups will spring up with their own dedicated websites. Organisations such as Amnesty International and Greenpeace might have interesting views on human rights and environmental issues. “Your best bet is just to get on the internet and look around,” says Hardy.

blog.manifest.co.uk

www.pirc.co.uk

Contact your fund manager

If you own units in a fund with an investment in a company that’s doing things you’re unhappy about, you are perfectly entitled to let them know about it. Many bigger fund management groups have signed up to the UK Stewardship Code, which works on a “comply or explain” basis – there’s a full list of signatories on the Financial Reporting Council website. The seven core principles of the code include having a clear policy on voting and disclosure of voting activity, and reporting periodically on their stewardship and voting activities. Many fund management groups publish their voting records on their websites, although these don’t make easy reading given the vast numbers of companies in which they have invested. You can usually email or write a letter; if it’s not obvious whom to contact, the company’s fundholder helpline should be able to tell you.

Don’t expect a big fund management company to vote a certain way simply because of your opinion. They are obliged to take your views into consideration, but for practical reasons they will generally vote all the shares they own in a particular company the same way.

Nominee accounts

Millions of investors in the UK – including all those with stocks and shares Isas - hold their shares via nominee accounts. This means that individual holdings are pooled and held as one block by the nominee company, whose name will appear on the register of shareholders maintained by the investee company’s registrar.

This reduces costs for both companies and stockbrokers, but makes it more difficult for the individual shareholder to communicate with the companies in which they’ve invested.

However, with some planning these difficulties can be overcome. “Part 9 of the Companies Act 2006 is optional,” explains Gavin Oldham, chief executive of The Share Centre. “But if a nominee company has signed up to it, then they are obliged to offer shareholder representation.” The Share Centre and many other retail stockbrokers, including Halifax, TD Direct and Hargreaves Lansdown, offer this service - although you may have to write or telephone in order to request it. They will pool the votes of all shareholders in a particular company and then vote them en bloc at the AGM. They can also facilitate attendance at an AGM, although it is wise to allow some time for this to be arranged.

www.share.com

www.frc.org.uk

Vote your shares

If you hold individual shares directly, through personal membership of Crest (the UK’s electronic settlement system), via employee save for shares schemes or via share certificates, you should receive proxy voting cards for the annual general meeting – usually at the same time as the annual report is dispatched. These allow you to vote your shares even if you don’t attend the meeting in person.

If you don’t receive these documents, you should contact your registrar. There are three in the UK – Equiniti (formerly Lloyds TSB Registrars), Computershare and Capita. The investor relations section of a company’s website will tell you who the registrars are.

Individual attendance at AGMs varies from half a dozen to several thousand, according to Peter Swaby, company secretary at Equiniti. Companies like Marks & Spencer and the privatised utilities tend to attract large numbers because of their big retail shareholder bases. The quality of the catering also plays a part, notes Swaby. “Those companies that lay on a good spread tend to get very good attendance.”

Voting levels generally are around the 70-75 per cent level, says Swaby – up from about 50-55 per cent a few years ago – but it’s hard to say what portion of this is attributable to individuals.

This is the last year that votes on executive pay will be advisory only; new legislation set to come into effect in October means that companies will be obliged to offer shareholders binding votes on pay policies (though not specific sums) every three years.

www.equiniti.com

www.computershare.com

www.capitaregistrars.com

Attend the AGM

If you want to attend an annual meeting in person, and your name is on the register, you can just turn up and demand admission provided you can prove who you are. But it’s much quicker and easier if you bring the attendance card supplied with the voting form.

If your name is not on the register – for instance, because you hold shares in a nominee account (see box) – then you will need to allow some time to arrange attendance.

Share Action, a group that campaigns for responsible investment, publishes guidelines on AGM attendance and participation. They are mostly aimed at non-governmental organisations and trade unions looking, but are just as applicable to private shareholders.

The UK Individual Shareholders’ Society also publishes a guide to the form and process of annual meetings on its website.

www.shareaction.org/shareholderactivist

www.sharesoc.org/general_meetings.html

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