Andrew T. Williams

The Emergence of Fiduciary Capitalism

The twentieth century has seen a sea change in the concentration of ownership of U.S. corporations. Early in the century Berle and Means identified the divorce of ownership from control as the central corporate governance problem, but since the 1970s ownership has been re-concentrating into the hands of fiduciary institutions -- most notably pension funds and mutual funds. By the 1990s fiduciaries collectively owned over 50% of the outstanding equity of the 1,000 largest corporations. This new pattern of ownership, fiduciary capitalism, has begun to raise important policy questions including: How can agents (fiduciaries) effectively monitor other agents (boards of directors)? What are the social implications of universal ownership where fiduciaries own substantial stakes in virtually all of the corporations in a country, and, finally, What does it mean to maximize shareholder wealth when fiduciaries are universal owners?

The Emergence of Universal Owners: Some Implications of Institutional Equity Ownership

THE United States the growth of institutional investors (public and cooperative pension funds, corporate and union pension funds, mutual funds and bank trusts) over the past twenty-five years has concentrated a substantial amount of corporate equity in the hands of a relatively small number of fiduciary institutions.1 This change in the ownership structure from individuals who held about 75 percent of stock in the early 1970s to institutional owners that currently own almost 60 percent of the largest 1,000 U.S. firms reflects the growth of various forms of indirect ownership (e.g., mutual funds) and beneficial claims

The Universal Owner's Role in Sustainable Economic Development

Abstract Toward the end of the twentieth century, ownership of corporate equity in the United States and Great Britain has once again become relatively concentrated, but this time in the hands of institutional owners such as pension funds and mutual funds. An important implication of this concentration is that ownership has become professional and, because these institutions are fiduciary institutions, subject to the fiduciary duties of loyalty and care. Furthermore, because of an institutions size or because of an explicitly policy of indexing, many institutions have become “universal owners”. A universal owner owns a small, but representative fraction of most of the companies in an economy. Thus, its ability to satisfy its fiduciary duties depends heavily on overall macroeconomic efficiency and performance rather than on the performance of any particular firm that it might own. Consequently, universal owners have a natural interest in issues of sustainable development because they receive the benefits from positive externalities generated by portfolio firms and are likewise harmed by their negative externalities.