A robust literature describes the incentives and stewardship practices of the “Big Three” asset managers (BlackRock, Vanguard, and State Street Global Advisors), often referring to these asset managers as “passive.” This is so common that the “Big Three,” “index fund,” and “passive manager” are used almost interchangeably by both academics and practitioners. This shorthand emerged in the foundational scholarship in this area, and while it may remain useful in certain contexts, its casual use obscures important features of the market and contributes to misperceptions. In this chapter, we demonstrate that it is a mistake to equate passive investing with index funds; index funds with the Big Three; and the Big Three with giant asset managers. We further sketch some of the consequences of these distinctions and set forth questions for further research.

In recent years, shareholder driven climate activism has focused attention on “universal owners and managers” – asset owners and managers with significant stakes in all or nearly all public companies. Advocates push these asset managers to prioritize enhancing overall portfolio value over maximizing individual company value, promoting "systemic stewardship" even when it involves sacrificing individual firm value for the benefit of the overall portfolio. This chapter assesses whether universal owners can and should pursue such a strategy. Our analysis is pessimistic for three main reasons. First, inducing individual portfolio firms to reduce their carbon output to address environmental concerns may trigger a competitive response that will reduce gains for other portfolio companies. Second, current corporate law has a "single firm focus" that conflicts with the potential "multi-firm focus" of large portfolio investors and exposes corporate fiduciaries to potential liability if they sacrifice firm value for the benefit of investors’ other holdings. Third, universal owners, managing diverse portfolios for various clients, face conflicts with fiduciary duties and their multi-client business model when implementing a tradeoff strategy. Given these challenges, systemic stewardship strategies that entail substantial tradeoffs are unlikely to have any significant impact on mitigating climate change.

Common ownership is the talk of the town in antitrust land. The competitive implications of rival firms being partially owned and controlled by a small set of overlapping owners are both fascinating and hotly contested. Could the source of potential harm be minority shareholder control in a setting of widely held companies? Critics question the extent and mechanisms of common owners’ influence driving any pro- or anticompetitive effects. This chapter aims to present a comprehensive account of partial ownership, capturing the incentives and effects of both individual and institutional investors and also cross- and common shareholding. It illustrates the early historical unity between corporate and competition laws in regulating shareholding acquisitions but also their progressive quiet disconnect. Triggered by the contemporary common ownership (hypo)thesis, it puts forward a taxonomy of shareholding types and their control characteristics from a competition law perspective, with emphasis on commonly thought passive and diversified investment holdings. The chapter concludes by urging competition and corporate governance and finance policymakers towards harmonic regulatory solutions to address common ownership. It also offers a quantum theory of the corporate property “atom”, drawing cautionary tales about the dynamic and ambiguous qualities of minority common shareholding for antitrust enforcers.

A stylized fact that lurks in the background of the recent literature on common ownership is the parallel increase in the profitability of oligopolistic industries and common ownership. Some have argued that the growth in common ownership has caused the increase in oligopoly profits and have proposed a variety of policy responses. This paper briefly reviews the available evidence and finds it unconvincing. It then provides an overview of the evidence that concentration and profitability have increased, considers alternative explanations, and suggests that the emergence of “superstar” firms – and not the growth in common ownership – could be a fundamental driver of the parallel increase in concentration and profitability.

This chapter critically examines the argument for giving shareholders alone the right to vote based on their ownership of the corporate residual. The argument is that shareholders are only paid what's left over after all other contractual participants – employees, customers, creditors, and suppliers – have been satisfied. Because shareholders receive the marginal gains, they have the best incentives to exercise discretion on the part of the entire firm, and hence should be accorded ultimate control. Shareholders, though, are not the unidimensional profit maximizers used to get this argument up and running. Moreover, shareholders do not, by virtue of their relationship with the firm, have ready access to the information necessary to cast informed votes, and many shareholders – such as index fund shareholders – lack real incentives to seek out that information. Finally, this vision of shareholders as the sole owners of the residual is just descriptively wrong – employees, too, are invested in the long-term interest of the firm, cannot easily diversify that interest, and often possess firm-specific skills as well as contributions to the ongoing value of the business.