Who Controls Big Business?
Published by Bob Foster
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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“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.”
I made the statement a few months back that average Americans do not care about the stock market per se, because they are not duly invested. And, we’re wondering why Americans are angry. We have enable Wall Street and crippled mainstreet, as they continue on with business as usual. The stat above is amazing.
It may have been more so in the past that the stock of a company was a true market indicator. Now, it appears to be less so. While both are needed, there has been too much speculation for years and not enough investing. We have seen these manipulated boom and bust cycles far too many times.
Numbers can be fixed as we have seen repeatedly on Wall Street. When the shareholders are more individuals and not instituions, I’m sure there was more of a hands on approach to investing and governing. Globalization, must have played a role here too, if only with regards to an expansive outlook as opposed to a national one.
Great post, Bob! Thank you.
Judith Ellis´s last blog ..Being Skinny II
Judith – Thanks for your comment. Yes, it does appear that we are in the age of “corporatism” rather than capitalism. The backbone of the American economy has shifted from manufacturing power to financial power, which puts that power more into the hands of relatively few. Actually, it appears that Wall Street pretty well controls our country, because they control (I use that term loosely) the money…as well as the government.
Bob Foster´s last blog ..Who Controls Big Business?