Private investors need to make their voices heard by companies. And the United Kingdom Shareholders' Associaton (UKSA), an independent organisation founded 10 years ago through the letters pages of Investors Chronicle, believes small investors can make a difference.

There is plenty for shareholders to complain about. We have seen a collapse in confidence in corporate governance and a disregard of the interests of private investors by Government and the financial services industry. But on the positive side, we believe that investors who concentrate on a limited number of shares do outperform, and the private investor, because of the small size of his or her investments and the longer time horizon, has some advantages over the institutions, particularly now with the advent of the Internet.

With appropriate use of the press, and with increasing numbers of activists, UKSA members are determined to make a difference. Our experience of the last 10 years leads us to think that our efforts will not be in vain. Power has drifted to the managers who now control boardrooms, but it is in shareholders interests to take regain control.

Boardroom power

Most topical is the sad fact that too many companies are simply not run in the interests of their shareholders. Most of the institutions holding the shares on behalf of the underlying owners have, until recently, just left management to get on with it. When they wake up, it can be too late - remember Marconi.

This is why the appalling share option schemes get approved, giving lucky managers millions in good years and leaving shareholders to stomach the losses alone in the bad years. We are recommending that our members vote and speak out in favour of managers buying shares in the open market out of cash bonuses, holding hold them until some years after they leave the company. We are generally against share option schemes, particularly for senior executives.

But it's about much more than share options. They are an extreme example of how senior management can develop a shorter term focus than is appropriate for any other party - whether employee, customer, supplier or shareholder.

A brilliant exposition of the systemic problem in both the UK and the US is contained in a paper by Robert Monks and Allen Sykes and published by the Centre for the Study of Financial Innovation (CSFI): Capitalism without owners will fail. For information on CSFI see www.csfi.org.uk . This paper is not available on the internet, but you can find the broad analysis by exploring Monks' site: www.ragm.com. The authors' analysis of six inappropriate powers of company executives, quoted here, hints at some of the practices they'd like to see end:

• They choose their "independent" non-executive colleagues;
   
• They choose the "independent" auditors, who are also usually consultants, and consultancy is worth several multiples of audit fees;
   
• They choose the remuneration consultants for the non-executive "independent" remuneration committee;
   
• They exercise influence over the company's pension fund trustees and their fund managers to take a non-activist corporate stance on other companies, implicitly in return for similar reciprocal passivity;
   
• They have major powers of patronage over fund managers seeking their pension fund business, who are frequently part of wider financial organisations wanting investment banking or insurance business; and
   
• They seldom encourage outside advice to non-executive directors on the merits of significant takeovers and mergers, despite the frequent clash with shareholder interests.

Annual General Meetings (AGMs)

The AGM still provides a valuable opportunity for individual shareholders to call managers to account, in spite of the power of the proxy vote. A well-researched question can have an impact. One of our favourites for underperforming companies is "Would the board care to comment on the value destroyed over the last x years: my estimate based on a simple analysis of the published figures is £y billion." It isn't a very difficult calculation, and the board's response doesn't usually rubbish the estimate. In practice, we like to warn the board of technical questions if possible - it helps to maintain goodwill and doesn't reduce the impact.

But we don't always complain. Sometimes we will want to compliment the management, or support them in difficult times. But we are very concerned at the steady erosion in the ability of individual shareholders to make their voices heard. We believe a number of companies have plans to downgrade the AGM - something which we will resist strongly.

Government and regulators

This brings us to another large subject. Regulation and tax usually suffer from the law of unintended consequences. The current lot of the individual investor owes much to this, and to the reluctance of government to challenge the interests of the financial services industry. This is not a party political point; the previous Government was no better than the current one.

For example, private shareholders are gradually being edged out of certificated holdings in favour of nominee accounts. Without legislative change to restore to holders in nominees the rights they had in certificated holdings, it will continue to be difficult or expensive to receive complete and timely communications from companies. With certificates:

• There is no cost to holding them. Nominees frequently have an annual charge;
   
• You can sell them through any broker. With nominees you are locked in;
   
• You receive full communications from your companies immediately without charge. With nominees you will typically get nothing or be charged, and there will be a delay and resulting inconvenience when a choice, such as taking up rights, has to be made;
   
• You receive an invitation to, and are entitled to attend, the company's AGM. With nominees you are not strictly entitled to attend and you may be discouraged from speaking.

In our response to the recent Company Law review, we suggested ways of ensuring the main ownership rights were maintained for holdings in nominee accounts, but those who drafted the recent White Paper have bowed to the demands of the City and not met our concerns in this vital area. We will continue to campaign that shareholders are not disenfranchised when they use nominee accounts.

We have recently realised that the Financial Services Authority (FSA) do not permit retail financial products, such as unit trusts, to have performance-based charges. This is one of the most stupid pieces of regulation. Clearly drafted with the best of intentions, it has the consequence of outlawing really sensible charging structures. But that's a discussion for another time.

Perhaps most worrying of all is that governments have not really faced up to the huge need for much more saving for retirement. This is the basic reason for almost all saving, and we all depend on company profits, whether directly through individual shareholdings or indirectly through institutional holdings. Most important of all is that we need low taxes on capital. The current government has, in fact, increased taxes on capital sharply, and we are under pressure from Europe to increase them still further. We can look at the sums at another time, but the rapid shrinking of final-salary pension schemes must be due in part to the massive hike in taxes on pension funds which got so little coverage at the time of this Government's first budget.

It pays to be an activist

Most campaigners do so not for purely selfish reasons, but because they believe in their cause. We believe that good investment performance comes from really knowing the companies in which you invest. This means that you can achieve attractive returns over the long term with a small number of holdings, providing you do the work on those companies. "Doing the work" is the important thing, and not everybody has the time, inclination and ability to do this. Access to a network of friends with whom you can share ideas is an important ingredient. The fact that you are reading the Investors Chronicle suggests you can do the work.

How did we get started?

It all began with a letter to the I C in 1992. Incensed by the latest executive pay scandal, Nick Stevens appealed to other investors to join together to do something about it. A number of people responded, and the United Kingdom Shareholders' Association was formed.

Many meetings were held in members' homes to thrash out what our objectives should be, to develop a proper organisation and plan our activities. Aided by a small amount of press coverage, we grew rapidly to between 300 and 500 members, and stayed at around that size for the next 10 years. We are now determined to grow again, and transform ourselves from a quietish campaigning body into something noisier, but focused on being effective.

The UK Shareholders' Association

What are our members' objectives?

Our members try to make money from shares, but some find that they can contribute to our campaigns in the process. We work towards the following goals:

• company managers' interests properly aligned with those of shareholders;
   
• empowered and educated individual investors whose interests are respected by government and who can operate on a level footing with institutional investors;
   
• financial services which really are good value for the investor.

Our primary objective has always been to represent the interests of the private shareholder. We are answerable only to our members, and are independent. All of our funding comes from our members' subscriptions, and all of our members are volunteers.

Why should private investors join UKSA?

People join UKSA for a variety of reasons. We don't give investment advice but, through our participative national and regional programmes, members:

• Gain access to a network of investors keen to discuss investments and share ideas;
   
• Attend company analyst-style meetings where they meet the directors of major plcs;
   
• Through working parties and at AGMs work to present private shareholders' needs to government, the City and to companies;
   
• Have the chance to talk with experts at day seminars and conferences.
   

Some, of course, are too busy to get involved, but we welcome their support by adding to our numbers and subscribing to our aims. Through our quarterly journal and regional mailings, we keep seek to keep them informed.

The future is in the hands of our members. Join us and make a difference!