Shareholders and corporate elections

Concern about the need to address the problem of conflicts of interest between management and shareholders has led to calls on shareholders to exercise their voting rights at the annual general meetings. It is argued here that the distribution of shareholding in the UK companies creates a complex pattern of incentives and disincentives for the holders of even larger blocks of shares to participate in the voting process. Whether the effort to participate is rewarded depends in an unpredictable manner on the distribution of large block shareholdings, and also on the percentage of the holders of small parcels who exercise their right to vote. A clear choice set is needed to arrive at a rational decision concerning the exercise of franchise, but that is not available.