Today, roughly two-thirds of the UK population own shares. But only a small minority engage with their investments. Tomorrow?s Investor is the first project to look at the corporate system from the perspective of ordinary citizens. Are we getting what we want from our investments? Is there a gap between the decisions that are taken on our behalf and the decisions that we would take if we were really engaged in this process? Do we want to or have the tools to get involved?
The RSA is conducting deliberative research to look at these questions. This will be the first stage of a project with the potential to deliver sweeping change in the culture of investment.
What is the problem?
Most people in the UK own shares. We own them not only in our own names, but also through our investments in pension companies and investment funds, a capital stake amounting to more than £500 billion in UK markets alone.
This democratisation of share ownership has changed the way public companies are owned. As recently as the 1970s, corporations were controlled by handfuls of wealthy individuals. Now, taken together, ordinary investors own large stakes in many of the biggest companies in the world.
Yet despite high profile scandals, increased criticism of the behaviour of some hedge funds, and widespread public dissatisfaction with boardroom pay raises, we largely remain passive and uninformed owners. As a result, people often find themselves with shareholdings that conflict with their interests. And the corporate system has a vacuum of power at its very centre.
By law and by tradition, companies are accountable to their owners. Yet it is not often acknowledged that true accountability is a two-way process. It involves not only being held to account, but also giving an account.
This kind of accountability only emerges out of a dialogue - one that is fair and honest on all sides. Tomorrow's Investor wants to kick-start this conversation.
And if you open this PDF it details some basic research the RSA has done into what indirect investors think about shareholder engagement. Here are the headline findings:
Over 70 per cent of respondents owned shares by some indirect means, mostly through private pensions or managed investment funds.
33 per cent of respondents did not know where any of their indirect shareholdings were invested. Most people had never had any contact with their fund manager, or with the trustees of their pension fund.
66 per cent of respondents felt that they did not want to be more involved in the financial management of their indirect shareholdings.
49 per cent felt they did not want to be more involved in ethical management.
However, the vast majority of respondents felt that public companies would benefit from greater investor involvement. 59 per cent felt that ethical management needed investor input; 47 per cent felt that this was the case with financial affairs.