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A bitter dispute within the UK’s small shareholder association will reach its climax on Sunday when its chairman faces down calls to stand down.

Martin White, UKSA chairman, and two other directors are battling a campaign waged by Roger Lawson, its former communications head, to replace them on the UKSA board.

At the heart of the dispute is a clash over what role the not-for-profit UKSA can play in the corporate governance of UK publicly listed companies.

Mr Lawson, who gained the support of 10 per cent of the UKSA’s members to trigger Sunday’s vote, argues that the current board has stifled the growth of the organisation. He also feels that it failed to seize the opportunity the financial crisis provided for small shareholders to gain greater influence.

Mr White calls Mr Lawson’s proposals “an attempted coup”.

Like many of Europe’s private investor groups, the UKSA was formed in the early 1990s at a time when privatisation saw a rise in the number of individual shareholders across the Continent.

But while Germany’s 63-year old DSW, the umbrella group for the country’s share clubs, boasts 25,000 paying members, and France’s Federation of Investment Clubs claims to represent 180,000, the UKSA has fewer than 1,500 members – about 1,000 more than the small shareholder body of Luxembourg.

Continental European shareholder associations often shout louder than their UK counterpart. For example, small shareholders in Fortis were able to temporarily freeze the break-up of the bank in 2008, while the UKSA has struggled to make itself heard in boardrooms.

Alan Dignam, professor of corporate law at Queen Mary, University of London, argues that a reason for the UK’s lack of a sizable private shareholder group is the dominance of pension funds and investment funds in the London market.

“Continental shareholder associations are in general much larger,” he says. “In the UK there are fewer shares you can buy due to the size of pension and investment funds, while in Germany this is less of the case as their pension funds are not that big.”

Mr Lawson has argued that the UKSA failed to capitalise on the profile-raising campaigns he led calling for compensation for small shareholders in Northern Rock and Bradford & Bingley.

“The campaigns are one of the best ways to recruit members,” Mr Lawson says.

“It is not like there are few private shareholders, it is just that the organisation has been ineffective. The London stock market is the biggest in Europe, but we are one of the smallest shareholder organisations.”

Mr White, however, argues that the volunteer nature of the UKSA makes large campaigns difficult.

“We have a small team of people who between them can do quality things, but this is all done for free,” Mr White says. “Most of our members are retired.”

Both men feel that a stronger voice for private shareholders could have put boards under greater scrutiny ahead of the financial crisis, and that UK institutional investors could have done more.

“I think the institutions failed horrendously,” says Mr White. “To challenge a company you need to be independently minded, and if institutions focus on what this will do to tomorrow’s share price, then they will not do that.”

As the battle continues the UKSA struggles to maintain any momentum, let alone rival its European peers.

“The UKSA has had a negligible influence,” says Prof Dignam.

“We like to encourage small shareholder groups, but the pensions funds are the key group representing individual shareholders.”

Copyright The Financial Times Limited 2017. All rights reserved.
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