Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Alissa Amico is Managing Director of the GOVERN Center.

If the global economy were a chess game, few pieces would be left on the board. Most would be relegated to the role of bystanders, observing a concentration of power in the hands of an ever-dwindling number of global players. Now let us imagine that the pieces left standing are corporate entities, with a shrinking number of ultimate owners at the helm. This analogy fundamentally characterizes the global economy today.

The globalization that embodied the 1990s unleashed the power of multinational corporations, enabling them rapidly to crush local competition in smaller markets. With the advent of the internet economy a decade later, online distribution and network effects boosted corporate concentration further, giving rise to behemoths such as Amazon, Google, Airbnb and Facebook.

Story continues below advertisement

Today, corporate ownership concentration is being fostered by new factors, which could ultimately pose a systemic threat to the global economy. One of the most important is the decline of public equity markets across developed economies: The number of companies accessing them has halved during the past decade. In most markets outside Asia, new companies are not listing; on the contrary, in response to greater compliance and regulatory obligations, some are de-listing.

This is occurring despite policy makers’ attempts over the past five years to revitalize capital markets and create incentives for fresh listings, especially of technology and state-owned firms. The recently aborted WeWork initial public offering (IPO) highlights the anemic condition of equity markets today. The listing of Saudi Aramco in December gained attention not only because of its size and symbolic importance, but also because IPOs have become rare.

With the decline in offerings globally, many of today’s “too-large-to-fail” companies are not financial institutions, as was the case during the 2008 crisis, but privately held non-financial firms. Ownership concentration is also a reality for listed firms, where the top three shareholders have majority control in 50 per cent of the world’s largest companies, according to recent OECD estimates.

This trend – set to continue in the coming years – is underpinning an increasing rift in economic ownership rights between company founders and ordinary investors. For example, investors in the Snapchat IPO were offered non-voting shares. While the IPO prompted an outcry, Snapchat is representative of the ownership structures at Tesla, Uber, Amazon and other large companies where founders use multiple share classes to retain control with minority ownership.

At the same time, with enthusiasm for privatization declining globally, governments remain significant – and, in many cases, controlling – owners of large pockets of corporate wealth. Indeed, in almost 10 per cent of the world’s listed companies, the public sector has a controlling stake. The consequences of this can be seen in the Nissan-Renault debacle, which highlights the governance perils of state-invested multinationals.

Some investors – such as Norway’s sovereign wealth fund – take a diversified approach. Other sovereign investors, such as Saudi Arabia’s Public Investment Fund, have much more concentrated stakes and play a more active role in governance.

But not only sovereign investors are becoming concentrated players. With the continuing shift of capital from actively to passively managed funds, asset managers’ portfolios are becoming significantly more concentrated. A recent study by two Harvard researchers, Lucian Bebchuk and Scott Hirst, found that 80 per cent of the capital allocated to investment funds today is going to Vanguard, BlackRock and State Street. In two decades, these three players are predicted to cast as much as 40 per cent of the votes in S&P 500 companies, while their stewardship resources have not grown proportionately.

Story continues below advertisement

The growing concentration of capital in these investment funds raises a host of new concerns, not least competition-related, as asset managers vote on strategic matters in companies that might be rivals. In the airline industry, for example, the ten largest institutional investors own 20 per cent of the global market capitalization. Indeed, concentration-related conflicts of interest faced by institutional investors and asset managers are already raising eyebrows in policy circles.

This picture is further complicated by the concentration of other financial intermediaries. Stock markets are now no longer mutualized or state-owned, but are instead mostly organized in a few large, self-listed exchange groups. As a result, competition for new listings is not occurring between national stock exchanges, but between an oligopoly of exchange groups whose ultimate objective is less the protection of the rights of shareholders in listed companies and more the defense of their own shareholders rights.

Ultimately, these trends translate into a dwindling number of large enterprises and financial intermediaries with increasingly concentrated ownership. While a degree of ownership concentration can create value, it can also create negative externalities on competition, wealth distribution and fiscal transparency on a macro level. On a micro level, the current level of economic concentration facilitates neither fair rents for minority shareholders nor respect for consumer rights.

Broadening corporations’ definitions of their purpose and responsibilities toward stakeholders, and focusing on the stewardship responsibilities of institutional investors and asset managers – both remedies currently in vogue among corporate executives and policy makers – is insufficient. Instead, what is needed is a focus on the duties of controlling shareholders toward minority investors. Stronger checks and balances, and perhaps even Chinese walls, also need to be introduced for large asset managers.

These and other remedies to address concentration are essential, not only in the name of better corporate governance, but also as a response to the worldwide wave of protests against the increasingly unjust distribution of national income and global wealth.

Copyright: Project Syndicate,

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies