Rise of the Institutional Equity Funds: Implications for Managerialism

Two salient features of fin de siecle economy in the United States and Western Europe are (1) the hollowing out of social relations between major corporations, their employees, and the communities in which they are located; and (2) the failure of the body politic to evolve socially protective responses to this change. Institutionalists and other concerned parties are moved to wonder: what combination of forces gave rise to the contemporary brand of hard-edged, shareholder value-oriented corporatism? And what might be done about it?1 The purpose of this article is to examine the following issue: to what extent has the growing concentration of control overfinancial assets in the postwar era (but especially since 1974) contributed to the (apparent) single-minded pursuit of shareholder value among many top-level corporate decision makers? Adolph Berle and Gardiner Means [1934] claimed that the separation of ownership and control of tangible assets was a critically important aspect of the corporate revolution. The argument is made here that a widening fissure between the ownership and control of financial or intangible assets is a distinctive characteristic of the postwar era in the industrialized world. Moreover, a serious consequence of the rising concentration of control over the disposition of intangible assets has been a shift in the distribution of economic and political power in favor of the custodians of giant pension and mutual funds. The following sections argue that the expanding concentration of control over