Open Finance – democratising our investment system

As capitalism suffers a crisis of confidence, there is huge potential for reshaping the system in which we’re directly invested through our pension savings.

David Clarke
31 July 2014

Flickr/arimoore. Some rights reserved.

The finance system is, at worst, broken, at best suffering a crippling fracture. Corporate behaviour has rarely been under such close scrutiny from, not just governments, regulatory bodies and the media but average citizens still suffering the effects of the financial crisis.

The steady stream of revelations about big businesses avoiding tax and the reward-for-failure culture, where chief executives continue to take home excessive remuneration packages regardless of performance, create a sense of confusion, anger and, above all, helplessness among average citizens. And yet it is the savings of those average citizens that prop up the system that is letting them down.

Institutional shareholders such as pension funds were criticised in the aftermath of the financial crisis for being ‘absentee landlords’ who had neglected governance flaws at the banks whose shares they owned or even wilfully overlooked those flaws whilst pressuring banks to pursue more risky, high-returns business strategies. But as the custodians of our savings, it’s a mistake to write pension funds off as a possible force for good in the economy.

ShareAction is working towards a world in which people see their savings as giving them a positive stake in the economy and a say in how big corporations conduct business. Anyone with a pension fund is, in effect, an owner of Britain’s biggest companies. For this to mean anything in practice, we need to empower savers to make themselves heard, demanding that their pension funds start to act as responsible shareowners that drive sustainable business behaviour.

Recent efforts to address corporate excess have focused on the role of shareholders in keeping companies in check, for example through Vince Cable’s introduction of binding shareholder votes on executive pay. At ShareAction, we highlight the potential of investors, whether large pension funds or individuals with a few shares, to be a positive influence on companies. We’ve got a strong track record of making change happen through our unique brand of socially engaged shareholder activism. We have trained and supported over 100 people this year in the art of a highly effective AGM intervention. Our team and supporters have been at over 60 AGMs, raising issues from environmental policies and tax justice to farm animal welfare and executive pay, with the directors of Britain’s biggest firms.

On the issue of the Living Wage alone we’ve had sustained success, working in collaboration with the Living Wage Foundation and Citizens UK. Our volunteer ‘AGM army’ has scored wins at Barclays, Legal & General, ITV, SSE and Burberry – each one of those firms now committed to accreditation as a Living Wage employer.

The rise of private pension savings has theoretically ‘democratised’ company ownership. But in practice the large institutional investors, including pension funds, that look after ordinary people’s savings are not answerable to those of us whose money they safeguard. Savers have limited access to information on how their money is invested and how shareholder rights are exercised on their behalf. Transparency in the pensions sector is the exception, not the rule. That urgently needs to change.

In July, ShareAction launched a Manifesto for Responsible Investment calling for legislation to make the nation’s pension funds properly accountable to savers, giving people the right to scrutinise investment decisions being made on our behalf and influence the policies of their pension fund.

Public trust in big business is at an all-time low. As capitalism suffers a crisis of confidence, there is huge potential for reshaping the system in which we’re directly invested through our pension savings. To realise that potential, we need to claim our voice and secure new rights as a matter of urgency.


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