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 1970’s ownership has been re’rating 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?