Share Power: a manifesto for giving control back to private investors

A new book by MoneyWeek editor Merryn Somerset Webb argues we can assert agency over companies through truly representative share ownership

The long road to ‘popular capitalism’

The book’s opening chapters chart initiatives by successive governments over the past few decades to widen share ownership. The Thatcher and Reagan administrations of the 1980s took the first steps, inspired by visions of ‘popular capitalism’ and ‘property-owning democracies’. In the US employees were enrolled in 401(k) pension savings schemes powered by equities. The UK’s privatisation programme encouraged many to acquire share holdings in former public companies such as BT and British Gas, and through the 1980s and 90s the number of UK shareholders rose from three million to nine million people, about 15% of the population. The introduction of ISAs and SIPPs allowing tax-free holdings of stocks and shares was a further step: 11 million people now own stocks and shares ISAs, and two million manage their own pensions through SIPPs.

Delegating our money

For Somerset Webb these shifting dynamics promise to give us the agency we say we want: the power through shareholder resolutions to bring executive pay under control, to distribute corporate rewards more fairly, to ensure wider representation on boards, to secure employee rights, to facilitate clean supply chains, and to oblige companies to set and honour climate change pledges. ‘The transformation of capitalism’, she says, ‘is technically at least — within our gift.’

Against stakeholder capitalism

Somerset Webb takes a bold stance against stakeholder capitalism. In a proper shareholding democracy there is no ‘them’ and ‘us’, no division between owners and shareholders: ‘We are all customers, employees or suppliers in one way or another — and we are also mostly owners.’ Going against prevailing opinion she likes the simplicity of Milton Friedman’s seminal 1970 New York Times article, in which he argued that a company’s only formal purpose should be to make profits for its shareholders. For Friedman this simple metric puts shareholders in charge, holding directors’ ‘feet to the fire with one set target that we know benefits all owners and pseudo-owners alike — money’. Businesses need to respect the standards we set to survive. We don’t need to redefine the purpose of corporations, or rely on fund managers to hold them to account. Shareholders can do so perfectly well if they are given the tools they need. Given sufficient power they can secure the objectives desired by advocates of stakeholder capitalism. Close shareholder scrutiny might have helped identify the overreaching that led to banking crisis. It would restrain runaway CEO pay. Commitments to clean supply chains and net zero targets would be enforced. There might also be less short-termist focus on perpetual mergers and takeovers.

Necessary — and sufficient?

Share Power sets out an elegant, concise argument, expressed with the clarity Somerset Webb has honed as an experienced financial journalist. It is eminently pragmatic, going with the grain of the prevailing economic system rather than seeking its radical reform, identifying capitalism’s own resources for addressing our discontent.

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