People hire managers, therefore capitalism isn’t working

So, capitalism means that the peeps with the money run the show. But if they just hire managers to do that then the system doesn’t work, does it? Because managers just isn’t the same as real involvement?

Therefore socialism, obviously.

The issue is a simple one to summarise. Apparently about two thirds of all private owners of quoted shares in the UK now own their shares through nominee pooled funds. As such they are not recorded as the legal owners of these shares. They have no voting rights. And no right to attend shareholder meetings. They don’t even have the right to accounts. And they have given an institution, who does not own the shares in reality, the right to exercise their vote in the company.

This matters for a number of reasons.

First, this makes a mockery of shareholder capitalism. The company has no idea who its shareholders are. And it is wholly unaccountable to them. The idea that somehow shareholders are at the centre of corporate concern is shown to be a sham, yet again, by this.

People hire managers therefore capitalism doesn’t work.

24 comments on “People hire managers, therefore capitalism isn’t working

  1. Angels & Ministers of Grace Defend Us!
    What idiot wrote that steaming pile of excrescence?

  2. I don’t want to attend meetings, I can see accounts that are published by the companies anyway.
    And I prefer if someone who I instruct to look out for my interests as a shareholder does look out for my interests as a shareholder.

    I can buy and hold shares myself too if I wish. Just as I can do it through a company and have them do stuff.

    My choice, not Ritchies choice. That’s why he dislikes it so, its people making their own decisions about involvement.

    Perhaps Ritchie tried setting up a fund and argued with the owners of the shares….

  3. If you want to set the record for unaccountable to anyone, let government run the businesses.

    Capitalism: The worst economic system, except for all the others.

  4. Well, I suppose he has to stumble across something valid occasionally. It’s not as if people weren’t talking about this half a century ago. One aspect being the frequency the same names turn up both on the boards of companies being invested in & on the boards of the institutions doing the investing.

  5. If there were no third party share managers would it make the overall economy more or less productive? Better run businesses vs less investment?

    If a company is made less efficient by having a shower of shit between it and its owners, I’m sure a more focussed outfit will be snapping at its heels. And if Steve can flog a new paradigm of Cloud-enabled corporate synergy to some slothy behemoth, I reckon he’ll know how to spend his commission well.

  6. First, this makes a mockery of shareholder capitalism

    Classic ritchiebollocks.

    Find something you don’t understand but is clearly (for whatever reason) abhorrent to the WGCE worldview. Define that in fist-typing mode, maliciously unclearly, to mean something completely different (active individual shareholder involvement?) Rant against that new ‘definition’.

    Why should each company know who the unit trust holders in the investing pension funds are? How would that satisfy the fat prat’s desire to tax everything?

    Yes, the principle- agent problem is, what’s?, ahh, yes ‘a problem’. Capitalism, even the shareholder variety thereof, seems to be struggling along moderately successfully, despite it.

  7. The company has no idea who its shareholders are. And it is wholly unaccountable to them.

    I don’t know how things work in the Land O’ Wogs, but here in ‘Merica mutual funds and (especially) pension funds are often quite aggressive in protecting shareholder interests (as they see them, of course) and holding corporate managements accountable. One need only glance at the activist history of CALPERS (The California Public Employees’ Retirement System) to see how aggressive these nominee pooled funds can be.

    So, in short, he is completely incorrect on both claims.

    Once again Murphy displays an absolutely astounding degree of ignorance about the most elementary basics of business.

  8. Once again Murphy displays an absolutely astounding degree of ignorance, period. Or full stop as us wogs would say.

  9. Also, what would Spud think about the efforts being made by, for example, the Church of Justin to shut down the operations of many of the companies in which its monies are invested?

  10. While I largely trust my fund managers to do a better job of holding boards accountable etc than I could myself (esp with my minute sliver of shareholding in the big firms – this is an issue that would only go away if we moved to a world where a “big” corporation is one worth a couple of million instead of tens of billions), I do find it odd that different financial providers don’t seem to compete much on this front. If someone made it clear they would fight aggressively on my behalf, I might well deem that as worth a slightly higher management fee on my funds.

  11. Companies should be responsible to a government minister, that way The People will exercise full control, but not in a Populist way, of course.

  12. The company has no idea who its shareholders are. And it is wholly unaccountable to them.

    IIRC, a few years ago Spud was arguing that shareholders don’t own the company and Boards don’t have a duty to maximise returns to them. Instead, Boards should be made to do Spud’s bidding, whatever that was at the time, I don’t remember.

    Now he’s concerned that Boards aren’t representing shareholders.

    Has he been to Damascus recently?

    Or has he discovered he has a pension fund which he will be relying on soon and noticed that it invests in companies on his behalf and is reliant on Boards maximising returns to shareholders in the form of dividends?

  13. The company has no idea who its shareholders are. And it is wholly unaccountable to them.

    Then how the hell do they keep sending me dividend checks?

  14. This whole thread is a result of Murphy reading an article in the Weekend Financial Times about a technical issue: in *some* (but not all) cases, shares are registered in the name of the shareowners stockbroker to reduce dealing costs if s/he wants to sell them.
    He has then written a blog about Unit Trusts/OEICS, in which he has scrambled everything. Someone who owns a unit in a OEIC does not own the underlying shares in BP or Shell or GSK s/he owns a unit in the OEIC.
    Dennis points out that CALPERS (a Pension Fund not an OEIC, to be pendantic but nevertheless an excellent example of institutions acting on behalf of the little guy) is a very active investor on behalf of its pensioners. On this side of the pond there are many active investors among both pension funds and investment managers (Legal and General for instance).
    @ MBE
    Some years ago the largest private client stockbroker set up a system for its clients to be able to vote at AGMs of companies in which they held shares (and in most cases they had the option of attending). Regrettably new management team has dropped this
    A few stockbrokers have systems for clients to notify the broker as to how they want to vote and the broker will then vote the shares according (e.g. “999 votes in favour of a dividend, 812 in favour of re-electing chairman, 188 against”).

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