Bill Jamieson: Size matters . . . in so many intriguing ways

Quixotic: Shareholder activism shows big institutions do not benefit from close mindedness
Quixotic: Shareholder activism shows big institutions do not benefit from close mindedness
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THREE essential rights come with being a shareholder in a public company: the right to receive an annual report; the right to notification of corporate actions; and the right to vote at annual meetings.

These are critical features of share ownership. They involve responsibilities as well as rights. They are not to be discarded lightly.

But, over the decades, this discarding has become a standard feature of stock market investment. For various reasons – ease, economy and the convenience of the stockbroker or financial adviser – private investors are encouraged into nominee ownership in which these essential rights are lost.

This separation of ownership and control has long characterised the UK stock market. But it is now almost embedded in the way private investors are channelled into standardised forms of equity purchase – ironically accompanied by political rhetoric about a share-owning democracy. Many investors prefer to be spared the documentation and decision-taking that comes with owning a share. But they have been the first to express outrage over such issues as boardroom pay and the pursuit of acquisitions that have subsequently weakened or destroyed shareholder value.

So, I was delighted last week to be the guest speaker at a meeting of the Edinburgh branch of the UK Shareholders Association (UKSA). Not only does it provide helpful advice on how investors can buy shares in a manner that ensures entitlement to annual reports and votes at annual meetings, but it also represents private investor concerns to bodies such as the Financial Reporting Council. It also organises private investor meetings with public companies. Many private investors will sympathise but feel that this is tilting at windmills: an utterly lost if noble cause. Equity ownership today is more than ever dominated by the big investment institutions and increasingly by overseas owners who do not tend to be activist investors.

However, this is to make light of the invaluable service private investors have rendered in drawing attention to corporate issues. Private investors led the institutions in challenging boardroom remuneration. And, in continental Europe, shareholder groups such as the VEB, the Dutch Shareholders Association, exercise a powerful influence.

A major campaign issue today is the establishment of shareholder committees with access to the board and a platform in annual reports, non-executive directors having been of questionable value in this regard.

Private investors may be small in voting power, but they can and do have a capacity to draw corporate issues to wider public attention – and lead the activism of institutions.

Membership of UKSA is £50, there is an excellent monthly Private Investor newsletter and an opportunity not only to meet with kindred spirits in your area but also to attend company visits. I am grateful to George Miller and colleagues for making contact, and full details are at Do lend support.

Performance from Angus as good as his word

ONE company that continues to attract active shareholder support is Edinburgh-based Personal Assets Trust (PAT).

It has attracted more than £100 million during the past year and its London meeting for shareholders earlier this year attracted more than 300 – an astonishing number for an investment trust regarded only a few years ago as a Doomsday cult. PAT is scoring highly with investors for its focus on capital protection, its high allocation to gold and index-linked government bonds – for now – and a highly-disciplined portfolio of defensive shares numbering just 21 stocks.

Arguably as engaging as the investment philosophy are the priceless quarterly newsletters from director Robin Angus, probably now the most widely-read bulletin produced by any investment or unit trust.

The latest edition is no exception. Angus writes: “The environment remains [to use that most depressing of words] ‘challenging’ for investors – poor fundamentals being disguised by central policy meddling, including further rounds of QE or ‘quantitative easing’, which sounds like a gentle laxative advertised on daytime television but is actually an assisted suicide kit for national currencies.”

On concerns over the independence referendum, Angus has comforting words for the First Minister: “Even with full independence – which the board as a whole thinks unlikely – businesses would not feel any need to flee Scotland. There are no plans yet for wagon-loads of gold to go jolting across the Tweed by the dawn’s early light, guarded by directors riding shotgun and pursued by kilted clansmen, Red revolutionaries or some Scottish hybrid of both”.

There is, however, a cautionary footnote: “Our gold bullion is kept in London anyway and so will be safe unless the English confiscate it”. Many would only add that PAT’s greatest treasure of all is firmly ensconced in Edinburgh: Mr Angus himself.