The Spread of People's Capitalism

MARGARET THATCHER'S high hopes of making Britain a nation of shareholders instead of shopkeepers have been dashed.

In the mid-1980s when the Iron Lady held sway, a keynote of Conservative Party philosophy was offering citizens a chance to buy a stake in the huge state industries being privatized. A prominent icon in the campaign was Sid - a cartoon character supposed to represent the little man and used in government-sponsored advertising to promote the sell-off of British Gas.

Millions decided they wanted to be Sids and seized their chance as shares in other state-run companies - British Airways, British Telecom, Rolls Royce, and a raft of electricity and water firms - went on sale.

At the height of the bonanza 32.6 million people - three-fifths of Britain's population - held shares in newly privatized industries.

Today there are only 11 million private shareholders, and many feel betrayed. The Rev. Dennis Nadin, an Anglican parson, is one of them. Along with some 5,000 other Sids, he turned up six weeks ago to British Gas's annual shareholders' meeting bent on preventing Cedric Brown, the company's chief executive, from getting a salary raise of half a million pounds ($860,000).

Mr. Nadin called the proposed payment "immoral," and most of the audience agreed. Over the past year they had seen British Gas share prices sag and dividend payments stagnate. One group of irate shareholders brought a pig with them. As TV cameras whirred, the animal was encouraged to put its nose in a trough.

But when Mr. Brown's salary came to a vote, institutional investors - insurance companies and big banks - decided the issue. Some 1.3 billion votes were cast in his favour. The small investor lacked power.

"Small investors," notes Justin Urquhart Stewart of Barclays Stockbrokers, "were encouraged to sell their shares quickly at a premium and make a guaranteed profit. Now the same shares are in the hands of the giant institutions."

The spokesman says that when shares in British Gas and other companies first went on offer, the government, anxious to ensure successful issues, undervalued the companies by up to one-third. "The price of shares shot up, and small investors were under strong temptation to sell. Millions did."

Small investors have not entirely quit the market, however. "Many are going into tax-free equity plans," says Mr. Stewart, "which means they are no longer registered as individual shareholders."

In response to charges that small investors in privatised industries have been betrayed, the government argues that today there are still many more of them than before the Conservatives came to power. Statistics bear this out.

Stuart Valentine, of the research group ProShare UK Ltd., notes that the proportion of Britain's adult population owning shares today is around 20 percent, up from 9 percent in 1979. But the trend has not given private shareholders power to decide policy.