When you think about activist shareholders, you probably imagine aggressive billionaires, hedge funds and hostile takeovers. What you do not imagine is a bunch of people chatting about stocks on an online forum.
Yet that is exactly what the Reddit users who drove up the price of shares in the struggling US electronics retailer GameStop are. They are a reminder that no matter how much or how little you have to invest, there is power in numbers and this way it is possible to enforce change.
It’s a powerful message to any investor who feels apathetic about where they put their money. If you have only a few hundred pounds, do you really need to worry about which stocks you put it in — it won’t make much difference anyway, will it?
If everyone thought like that then nothing would ever change for the better. If investors did not speak up, company bosses would overpay themselves even when their business was tanking and their staff were being made redundant; women and ethnic minorities would be barred from boardrooms; and tons of plastic would be dumped into the ocean because recycling is expensive or inconvenient.
Sure, you might say, it’s easy for professionals to force that change — they have billions of pounds to back them up. But those billions are the money in the pension pots of you, me and our friends and family. Fund managers are there to represent us and our views.
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So, how can you make a difference? First, take an interest, do some reading before you pick a fund. I don’t mean look at its performance and top 10 holdings, look at the parent company and see what information it makes available about its stewardship priorities and how it votes. Organisations such as Share Action provide reports that rank companies on their performance in areas such as climate change or human rights.
Consider how transparent your fund company is. If the firm is taking stewardship seriously, it should want to shout about it from the rooftops. L&G, for example, updates its voting record on a daily basis and it is publicly available for investors to see. Other firms might provide only a vague summary once a year. Check if the company and its managers attend meetings, whether they take an interest and vote or opt instead to use an external agency to put in a proxy vote on their behalf.
You could also vote. If you have a specific interest in certain companies, speak up. All shareholders — whether you own one share or 1,000 — are entitled to attend AGMs, ask questions and vote on issues such as emissions and executive pay.
Contact your fund manager. If you don’t understand why they didn’t vote or why they approved a bumper pay packet for a less-than-impressive chief executive, ask. They are looking after your money, after all, and they should be able to explain their decisions.
Some fund groups, such as L&G and Standard Life, regularly survey their investors to find out which issues they believe are most important, so they know what to prioritise. Does your fund group ever contact you? If not, find one that will.
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Finally, vote with your feet. The most powerful thing any investor can do is take their money elsewhere if they are unhappy with how it’s being used. You might think your savings pot won’t make a difference, but small amounts gain momentum and they add up. Give it to a responsible fund manager and he can go and do battle on your behalf.
Holly Black is a senior editor at Morningstar.co.uk
