Hawley and Williams (2000)

Hawley, James P. and Andrew T. Williams. The Rise of Fiduciary Capitalism: How Institutional Investors Can Make Corporate American More Democratic. University of Pennsylvania Press, 2000.

LK comment (2001):  This book documents and discusses a shift in the composition of shareholders in U.S. corporations over the past 30 years. The authors show that, where institutional investors were in the minority in the early 1970s (80% of shareholders were individuals), today they have de facto control over many or most large American companies (as of 2000 institutions owned 60% of the largest 1000 firms).

"Hence, ownership and indeed private property in the corporate form is being rapidly transformed into an institution in which agents represent agents in what can be quite long and complex chains between the firm at one end and the ultimate beneficial 'owner' or claimant at the other."

The authors introduce the concept of the "universal owner", an institution representing many individual beneficiaries and investing in many companies, which therefore has a broad interest in issues of social importance such as education and the environment.


LK comment (2018):  The Rise of Fiduciary Capitalism has proven to be one of the most influential books in the field of institutional ESG investment.  The term "universal owner" - first coined by Robert Monks and popularized in large part because of this book - is now commonplace.

From a financial practice perspective, institutional investors have generally diversified away virtually all of their unsystematic risk.  Therefore, their investment interest should be primarily with with systematic and systemic risk.  In May 2015, Anne Simpson of CalPERS commented (source here) that "at $307 billion we can’t hide if there is systemic risk.”  While many investors have relatively short time horizons, this universality of holdings and the long duration of most institutions' liabilities also implies a very long-term investment perspective.  In the same article Simpson states that “we are not only huge in size, we are long term to the point of being virtually permanent.”

In practice, this means that many large institutional investors focus their ESG efforts on system-relevant issues such as corporate governance and climate change.


Link:  http://www.upenn.edu/pennpress/book/13400.html