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Ric Marshall

Ric Marshall

Executive Director, MSCI ESG Research

Jonathan Ponder

Jonathan Ponder

Senior Associate, MSCI Research

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Equities Ownership: Concentration on the Rise?

  • Controlled companies, where more than 30% of the voting power is held by a single entity, accounted for nearly 46% of all constituents of the MSCI ACWI Index, as of Feb. 1, 2022, a 44% increase from 2015 levels.
  • Widely held companies dropped to 40% of index market cap from 52%, and the percentage of companies that were widely held dropped from 41% to just 23% — another clear indicator of increased ownership concentration.
  • Among widely held and principal-shareholder companies, universal managers BlackRock held 5% or more of 638 index constituents, (72% U.S. listed) and Vanguard held 5% or more of 424 index constituents (93% U.S. listed).

In 2022, the three most common types of strategic shareholders that we track founders, families and state entities — were either the controlling or principal shareholder at nearly 50% of all MSCI ACWI Index constituents (as shown below). This is nearly twice as high a percentage as we reported in 2015, indicating a significant increase in large ownership blocks.1 By comparison, the percentage of index constituents that were widely held declined from 41% to just 23%, dropping from 52% of total index market cap to 40%, despite remaining the dominant ownership form in the United States and certain other developed markets.

 

Control level groups by index market groups

Data as of Feb. 1, 2022, based on the percentages of total market cap in USD. Combined, these three index groups comprise the full MSCI ACWI Index. Source: MSCI ESG Research

For investors this growing concentration of ownership and control of global equities could result in a loss of influence, and make engagement with listed companies more difficult, which may also have important ramifications for how companies are governed.

 

Ownership concentration was up

We found evidence of increased concentration of ownership among non-controlled companies as well in the charts below. Of the 902 companies we classified as principal shareholder companies this year, 230 had at least two principal-level shareholders, and 39 had at least three principal-level shareholders. In all, effective control by just two or three shareholders, i.e., having at least 30% of voting rights, was found at 112 of these principal shareholder companies.2

 

Ownership concentration and control in the MSCI ACWI Index increased

Data as of Feb. 1, 2022. Source: MSCI ESG Research

 

Control in focus

Increased concentration has also occurred among the widely held companies we examined. We observed an increase in the size and number of reported holdings of two large asset managers in particular: The Vanguard Group Inc. and BlackRock Inc. Both of these firms invest in the entire market, through various index-based funds and portfolios, and thus hold positions in thousands of companies on behalf of fee-paying clients.3

The prominence and importance of these large asset managers is highlighted in tables below. Vanguard and BlackRock were among the largest shareholders at all of the U.S. listed companies in these two lists.

Largest shareholders at the 10 largest widely held companies in MSCI ACWI

Company Market Cap (USD Trill.) MSCI ACWI Index Share GICS Sector4 Largest Shareholders
Apple 2.85 3.1% Information Technology Vanguard – 7.68%
BlackRock – 6.47%
Berkshire Hathaway – 5.56%
Microsoft 2.31 2.5% Information Technology Vanguard – 8.18%
BlackRock – 6.87%
Nvidia 0.62 0.7% Information Technology Vanguard – 7.71%
BlackRock – 7.20%
FMR – 7.03%
Taiwan Semiconductor 0.59 0.6% Information Technology National Development Fund – 6.38%
Visa 0.51 0.6% Information Technology Vanguard – 8.50%
BlackRock – 7.50%
Johnson & Johnson 0.45 0.5% Health Care Vanguard – 8.66%
BlackRock – 7.20%
FMR – 5.47%
JPMorgan Chase 0.45 0.5% Financials Vanguard – 7.99%
BlackRock – 6.30%
UnitedHealth 0.44 0.5% Health Care Vanguard – 8.34%
BlackRock – 7.50%
FMR – 5.61%
Home Depot 0.39 0.4% Consumer Discretionary Vanguard – 8.30%
BlackRock – 6.70%
Procter & Gamble 0.38 0.4% Consumer Staples Vanguard – 8.97%
BlackRock – 6.67%

Data as of Feb. 1, 2022. Source: MSCI ESG Research

Largest shareholders at the 10 largest U.S. principal shareholder companies in MSCI ACWI

Company Market Cap (USD Trill.) MSCI ACWI Index Share GICS Sector Largest Shareholders
Amazon.com 1.53 1.7% Consumer Discretionary Jeffrey P. Bezos – 14.00%
Vanguard – 6.40%
BlackRock – 5.50%
Tesla 0.94 1.0% Consumer Discretionary Elon Musk – 23.10%
Vanguard – 5.90%
BlackRock – 5.10%
Capital Ventures – 5.00%
Mastercard 0.39 0.4% Information Technology Mastercard Foundation – 11.00%
Vanguard – 7.10%
BlackRock – 6.80%
Bank of America 0.38 0.4% Financials Berkshire Hathaway – 12.80%
Vanguard – 7.30%
BlackRock – 6.20%
Broadcom 0.24 0.3% Information Technology Capital World – 10.20%
Capital International – 8.50%
Vanguard – 8.30%
Capital Research – 8.10%
BlackRock – 6.60%
Eli Lilly 0.24 0.3% Health Care Lilly Endowment – 11.60%
Vanguard – 7.20%
BlackRock – 6.10%
PNC Financial – 5.40%
Danaher 0.21 0.2% Health Care Mitchell & Steven Rales – 11.10%
Vanguard – 6.8%
BlackRock – 6.70%
Morgan Stanley 0.19 0.2% Financials MUFG – 21.60%
State Street – 7.40%
Vanguard – 6.70%
BlackRock – 6.10%
American Express 0.14 0.2% Financials Berkshire Hathaway – 18.87%
Vanguard – 5.84%
BlackRock – 5.80%
Wellington – 5.17%
Deere & Co 0.12 0.1% Industrials Cascade – 10.00%
Vanguard – 7.50%
BlackRock – 5.90%
Wellington – 5.30%

Data as of Feb. 1, 2022. Source: MSCI ESG Research

BlackRock and Vanguard also held 5% or more of voting shares at many other index constituents. Among widely held and principal shareholder companies, BlackRock held 5% or more of 638 index constituents, 458 of which were U.S. listed, with an average holding size of 7.5%. Vanguard held 5% or more of 424 index constituents, 395 of which were U.S. listed, with an average holding size of 9.4%.

These figures are significant because they confirm the extent to which ownership interests and voting power at principal shareholder and widely held companies are concentrated in the hands of a relatively small number of large investors. While other researchers have reported similar findings, much of the academic scholarship in this area has focused on the social and political implications of these shifts, and concerns regarding the possibility of these large institutions exercising too much — or too little — influence over the companies in which they invest.5

Such analyses, while valuable, fail to understand the role of these huge asset managers in the equity market ecosystem. It may be more helpful to think of them as universal managers, in a refinement of the concept of the universal owner first formulated by Monks and Minow in 1995.6 This approach explicitly acknowledges that such investors are typically not the ultimate beneficial owners of these companies.

 

The way forward?

Last year’s announcement by BlackRock that they will allow certain of their institutional clients to cast their own proxy votes, beginning in 2022, provides an example of one possible future direction for these firms, a way that explicitly acknowledges the importance of exercising shareholder rights.7 It also suggests that the apparent ownership concentration we observed may really just reflect a new way of achieving — and managing — more widely dispersed ownership. If we think of universal managers not as monolithic owners but rather as complex mechanisms whereby their many clients may ultimately exercise their shareholder rights and responsibilities more efficiently and effectively, then what we may see is not greater ownership concentration but its opposite.

 

 

1MSCI considers companies to be controlled whenever a single shareholder or shareholder block controls 30% or more of their voting rights. Companies with one or more shareholders or shareholder blocks holding between 10% and 30% of the companies’ voting shares are considered to be principal shareholder companies. For additional background, see ESG Ratings

2OECD researchers arrived at similar findings in their own recent survey of global ownership trends. De La Cruz, A., Medina, A., and Tang, Y. “Owners of the World’s Listed Companies.” OECD Capital Market Series, Oct. 17, 2019.

3According to their most recent reports on stewardship and engagement, both of these investors vote annually in approximately 14,000 annual meetings. For example, see:
“Investment Stewardship Annual Report: January 1 — December 31, 2021.” BlackRock, Dec. 31, 2021.
“Investment Stewardship Annual Report.” Vanguard, April 5, 2022.

4The Global Industry Classification Standard (GICS®) is the standard jointly developed by MSCI and S&P Global Market Intelligence.

5Bebchuk, Lucian A., and Hirst, Scott. 2019. “The Specter of the Giant Three.” Boston University Law Review 99.

6Monks, Robert A.G., and Minow, Nell. 1995. Corporate Governance. Hoboken, NJ: Wiley.
Williams, Andrew; Hawley, James. 2000. ”The Emergence of Universal Owners,” Challenge 43 no. 4 (July/August).

7Posner, Cydney S. “BlackRock to Permit Some Clients to Vote.” Harvard Law School Forum on Corporate Governance, Oct. 5, 2021.

 

 

Further Reading

Ownership and Control 2022: Global Equities Concentration on the Rise

How Ownership Concentration Has Increased

Ownership Forms and Governance Control

Ownership Structures in Emerging Markets

Assessing Control: Measuring And Assessing The Alignment Between Economic Exposure And Voting Power At Controlled Companies

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