Who Controls Big Business?
Many folks have been criticizing the Boards of Directors of big companies for not controlling their CEOs, and for allowing their companies to get into serious financial trouble (among other things). Of course the board members are elected by the Shareholders, who essentially “own” the companies and who are responsible for electing the right people to oversee their ownership.
But, just who are these shareholders? I ran across an interesting statistic the other day that pretty well answers that question. In 1960, 92% of the stock of American companies was individually held by private citizens…everyday people who elected the Board of Directors of the companies they held stock in.
Today…75% of the stock of American companies is held by “institutions.” This includes mutual funds, pension funds, Wall Street funds, and “other” large block investors. It is the fund and plan administrators who pick and vote-in the directors—not the individual stock owners.
In addition, I recently read a review of a report, put out by the Zurich-based Swiss Federal Institute of Technology, which studied 24,877 stocks in 48 countries. This report determined that the “backbone” of each country’s financial market “…consisted of remarkably few shareholders.”
Here is what the report said about American companies: “…while each American company may link to many owners, …analysis found that the owners varied little from stock to stock, meaning that comparatively few hands are holding the reins of the entire market.”
So, it appears that big companies are controlled by other big companies. Is it any wonder that everyday private citizens have little say on how the world economy functions? Or even how our own stock ownership is handled, because we cannot compete with the massive blocks of stock under control of “other” big businesses.
This sounds a little incestuous to me—does it to you?
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