Economic and Industrial Democracy

The Changing Pattern of Share Ownership. As indicated elsewhere in these pages, one of the most important economic developments of recent years has been the changing pattern of share ownership in UK quoted companies. Ownership of equities gives the holder the legal right to vote at company annual general meetings on such matters as the appointment and removal of directors. When a group of investors owns enough shares to control the board of directors then that group can clearly exert a powerful influence over managerial decision‐making. This is now the case in the United Kingdom with respect to a major group of investors. The combined equity holdings of institutional investors — pension funds, insurance companies, investment trust companies and unit trusts — amounted to 51 per cent of all UK quoted equities at the end of 1980. These financial institutions thus controlled more than half the voting power in British industrial and commercial enterprises, and they continue to acquire a further two per cent of all UK quoted equities each year. This gives considerable power to institutional portfolio managers. It could be suggested that this power, particularly in the case of pension funds which form the largest and fastest growing sector, should be vested in those who contribute the savings which finance the growth of institutional equity holdings, that is employees or their elected representatives.