Shareholder participation on the rise in the UK

UK retail investors are taking a more active role in their holdings, according to data showing a surge in voting participation among shareholders.

Some 210,000 shareholder votes were processed by fund supermarket Interactive Investor in 2022, a 30 per cent increase on the previous year. The boost came in the first full year since the platform required its clients to opt out of receiving notifications about upcoming votes.

“Private investors can have a powerful collective influence over a company’s conduct and future direction through their vote, should they wish to use it,” said Richard Wilson, chief executive of Interactive Investor. “Sometimes, you just need to remove barriers and red tape.”

Data from Interactive Investor suggested there was an appetite among retail investors to participate in shareholder democracy. However, the slow pace of digitisation and nominee structure has been labelled a barrier to participation.

Interactive Investor moved to an opt-out system for notifications in November 2021, which meant customers were automatically notified about fundraising, upcoming votes and events such as AGMs.

The platform also said the take-up of votes last year fell to 8 per cent from 14 per cent in 2021. It attributed this figure to the increased pool of people now able to vote.

At present, platforms act as intermediaries and hold stocks on behalf of investors as nominees. The intermediary is the legal owner of these shares and under current rules does not have to disclose vote information.

Voting rights are attached to equities and investment trusts, as listed entities. About 11 per cent of tradeable instruments on Interactive Investor fall into these categories.

Wilson said voting on the platform is currently available to desktop users, but clients would be able to use their mobile app later this year. He added that the costs for Interactive Investor to deliver the service were minimal and he saw “no reason why platforms shouldn’t opt all their customers in for participation”.

ShareSoc, an association for individual shareholders, welcomed the trend. Cliff Weight, director, said Interactive Investor’s move to opt in users had been a “groundbreaking decision”.

The UK government is currently reviewing the system of share ownership following an earlier study of secondary capital-raising by Mark Austin, a partner at law firm Freshfields. He concluded the intermediated system had delivered cost efficiencies but these had been prioritised over transparency and corporate governance.

The uptick in participation was a positive development, said the UK Shareholders’ Association, a group representing private investors. However, it said members were still held back by a loss of rights through the nominee system.

The association has urged the government to restore a direct link between companies and investors with shareholdings held via platforms. It has called for greater transparency on the shareholders’ register, which it said will help investors co-ordinate on issues such corporate pay and climate change.

AGMs held by BP and Shell were two of the 10 most voted on last year, according to Interactive Investor, as investors pressed the companies to move faster on net zero and cut greenhouse gas emissions.

Wilson said concerns over complexity, aside from clarifying the question of beneficial ownership and vested interests, were “fatuous and self serving”, with his priority improving user experience and encouraging issuers to share more detailed and accessible information.

“Provided the content flows to investors directly with all the associated rights, and it supports a lower barrier of entry, in terms of cost, higher transparency and higher liquidity, then the consumer and country benefit,” he added.