vrdiver wrote:Until small shareholders, including the end-policy holders of pension companies, actually get off their ar@@es and give direction to the management, the management will continue to milk the system for all it's worth. Why wouldn't they?
To bring this back to the practical level that this board is supposed to be about, the trouble is the question of what small shareholders
can do in the way of getting off their ar@@es and giving direction to management. It's not much in practice, and most of it is only likely to be even mildly effective if one can get a critical mass of small shareholders to do it, which tends to be very hard because it can be quite inconvenient for the small shareholder.
For example, one can vote against it in several ways at the AGM - for instance, voting against the remuneration policy and/or report, voting against the re-election of directors who benefit from excessive increases (which means "any increases" in circumstances like these!), and voting against re-election of directors who serve on the Remuneration Committee. But that won't even be noticed unless enough small shareholders do it to produce a significant increase in the percentage vote against the resolutions concerned, and that's very unlikely because:
(a) Many small shareholders cannot vote without changing how they hold their shares - in particular, shares held in non-ISA nominee accounts can only be voted if the broker offers the service of passing the shareholder's votes on to the company, there's no obligation on brokers to offer that service, and from a broker's point of view offering that service is basically an extra cost with no clear indication that their clients actually value it enough to justify that cost.
(b) Many more small shareholders can vote, but only if they know how to and willing to face some hassle and/or cost to do so. For example, I believe brokers are obliged to pass on the votes of their ISA clients to the company - but not to offer that service to them. So the small shareholder who holds their shares in an ISA (which is necessarily a nominee account) needs to know to ask their broker to vote for them, may face some obfuscatory hassle from the broker designed to get them to give up the idea, and might possibly even face a fee for supplying the service. That's on top of the unavoidable hassle in any vote of learning what the questions are, what the answers mean (which is not entirely obvious for many standard AGM resolutions) and possible research (e.g. digging out who the Remuneration Committee members are if you want to vote against them). There are ways of holding shares that only involve that unavoidable hassle or a very small amount more - certificated holdings (rare and steadily more discouraged), CREST account holdings (ditto - e.g. Charles Stanley Direct tried to move me to a nominee account recently, on a we'll-do-it-unless-you-tell-us-not-to basis), and a few nominee brokers (e.g. TD Direct Investing) do make it pretty easy to vote, but a lot don't.
(c) Even if every small shareholder were to vote against a resolution, in many cases the company's shareholder base is so dominated by big shareholders that their combined votes still wouldn't add up to all that significant a vote against - it would probably be noticable, but not big enough to be all that persuasive that something needs fixing.
Turning up at the AGM and asking questions is another method - but being able to do that is similar to voting in that only certificated and CREST shareholders can automatically do it, while nominee account holders are at least dependent on knowing to ask and may be dependent on the broker's willingness to do it at all. And of course, the unavoidable hassle and cost is typically quite a bit more than for voting, usually involving time off work and/or significant travel costs. And actually making the questions good ones that cannot be fobbed off isn't easy...
Various types of politicking are also possible, with companies' investor relations departments (*), nominee brokers (to get them to make voting easier), fund managers (ditto - it is perfectly possible for them to pass the beneficial owners' votes on, but as with nominee brokers, their obvious viewpoint will be that it's unnecessary extra cost for no clear benefit) and politicians (to get them to change various laws that lead to the current situation, for instance to make it obligatory for nominee brokers and fund managers to offer a voting service). But again, a critical mass of people politicking for those things is needed, and I rather doubt it will be obtained...
And indeed, there's politicking with other shareholders, which to some extent is what I'm doing with this post! I'll be voting against various Pearson AGM resolutions when the time to do so arrives and would like to see other shareholders doing likewise. But in all honesty, I can't urge people to do so all that hard, because I know the chances of any meaningful success are very slim and almost certainly don't justify the trouble many shareholders will have to take to vote...
(*) Or one can try doing it directly with the directors, but long before that gets anywhere near critical-mass support from small shareholders, it will get intercepted by investor relations or other underlings. And quite understandably so - dealing with hundreds or thousands of small shareholders will be a
major distraction from whatever the director is supposed to be doing...
Gengulphus