Shareholders – mainly large institutions running pension funds – are supposed to invest for the long-term on behalf of their ultimate owners: you and me.
They are also charged with channelling funds into businesses that will grow, boost the UK economy and so generate a decent retirement income for tomorrow’s pensioners.
The reality is they do none of those things. As the well-known US fund manager Bill Gross said this week, no fewer than four out of five active money managers underperform the market, despite the large fees they charge for their supposed expertise.
The core of the problem is that big institutional investors and company managements are co-worshippers at the discredited shrine of shareholder value. This notion, that a company’s duty is to pander to the short-term needs of large shareholders, led to a headlong rush to maximise profit at any price.
It came at the expense of employees, millions of whom lost their jobs or had their wages curbed in cost-cutting drives, and of consumers. Taken far enough, it is a self-defeating concept as it drives down people’s spending power and depresses demand for products. (read more at SUNDERLAND ON SATURDAY: Why we must all be activist shareholders | Mail Online, 2/4/2011.