Most private investors are aware of how the Internet is beginning to change the financial services industry, with online trading services cutting the cost of buying and selling shares.

In the near future, however, the Net may provide investors in pension schemes, or holders of life assurance policies, with the means to have a much greater say in where their money is invested. Although this sounds innocuous, it has important repercussions for democracy.

All too often, big corporations are unaccountable to the general public. Politicians can be voted out of office, but chairmen and chief executives are rarely unseated by shareholder actions led by private individual shareholders.

More often than not, pension funds and institutional investors do not care about business ethics as long as the profits keep rolling in. However, many people who pay into pension funds do not feel this way.

Ethical pension funds, which do not invest in "unethical companies", already exist. However, their policies have little impact on the share price of the companies in which they don't invest. The scheme I am proposing would take a much more aggressive stance in promoting change in the way public companies act.

National laws no longer prevent corporations acting in anti-social ways as a company can easily move its headquarters or intensively lobby the government to change its laws. What corporations do listen to, however, is the money that pension funds and other institutions invest in them.

Whose money is this? It belongs to you and me the money we have invested for our future, the money we have saved over the years for when we retire. Although the pension funds hold the shares, the shares have been bought with our money. That is, fund managers are taking decisions on our behalf. Does this still need to be the case?

In the past, the administration cost of gathering the views of investors was simply too high to be practical. Imagine the Prudential trying to ask millions of investors whether they think Premier Oil should carry on working in Burma, where there is a violent dictatorship. The paperwork and postage alone would be too great to justify such a survey just for an investment decision.

However, this is not the case any more. The Internet allows millions of people to register their views within seconds. Administration costs associated with this are minimal users would log on to the voting system, authenticate their identify with a password (and any other security measures deemed necessary) and then cast their vote, which is instantly recorded and counted.

Of course there are security and authentication issues, but these are no different to the problems that are being solved for Internet banking and e-commerce.

Although the theory may be attractive, this type of scheme is only as good as its implementation. So how would it work in practice? I am proposing a pension fund for investors with Internet access where votes would be held at the request of the members (i.e. investors). Where there is a quorum, action would be taken on the result of the vote. This is democracy in action for an age where our existing version of democracy is rapidly becoming less relevant.

Consider an example: say a mining company plans to open a mine in Brazil which necessarily involves moving thousands of tribespeople from homes they have occupied for centuries. The Democratic Pension Fund receives a "request for vote" from a large number of its members. Within 12 hours a vote is organised. Members vote on the question "does the mining company's activity in Brazil contravene the ethical code of the Democratic Pension Fund?"

Within 24 hours, the vote shows an overwhelming majority of members have said "yes".

The following day the Democratic Pension Fund sells all its shares in the company, causing a 7 per cent fall in the stock. Other investors pile out, worrying that there may be more to come. The stock falls another 10 per cent. The company is forced to abandon its plans. The Democratic Pension Fund buys back its shares and the mining company's share price rises again.

Naturally, this strategy will work only if enough money is involved to move a stock price and have a significant impact in the boardroom.

Fund managers tend to say that such an investment strategy would cost people money, and therefore will always ultimately fail. I disagree. I believe that as soon as people see their money making a difference, they will be only too happy to forgo profits from other people's misery and hardship.

At present, people with Internet access form a minority, not only in Britain but elsewhere. One day, this will no longer be the case. When the Internet is delivered through the television screen, it will become a mass medium.

Before that happens, this system of democratic capitalism needs to be tested. The future can be about greater democracy in the business world, not less. If enough support is gathered, the big pension funds will have to follow suit. (Financial Times service)

The author, Nick Reed, is a London-based financial journalist and director of RVC an Internet consultancy