People often believe that the most prominent public corporations in the world have highly diversified share ownership with the company owning less than 15–5% of the shareholdings. This unfortunately could not be further from the truth. In today’s article, we take a glance into the biggest shareholders of companies, who these shareholders are, and the implications of this process.
Concentration Levels
A study recently used the Bureau van Dijk global database for corporations that holds 299 of the largest publicly listed corporations to determine whom the ownership of these shares really belongs to.
By use of the terms “nominee” or “depository,” corporations can conceal the genuine ownership of shares under specific situations. Legally, these are treated differently, depending on where you live due to different state jurisdictions. Investing choices are seldom made by the nominee on their own initiative. Instead, decision-making and control are exercised by the shares’ ― all too often hidden ― beneficial owners.
Nominee holdings have mostly no effect on the global picture. Rather, the study showcased those fund managers who dominated the analysis and were the ones who could really mobilize the funds owned by the investors.
So Who Are The Largest Corporations, Shareholders?
Over 51.4% of the total assets for the 299 firms were held or handled by the 30 biggest shareholders (out of over 2,100 share managers). That is a substantial amount of concentration of power and resources with just 1.5 percent of shareholders owning 51 percent of the company’s shares.
These same 30 shareholders made up 21 private-sector shareholders and 9 government-owned public-sector shareholders. Practically unknown outside the financial social groups, BlackRock Inc held and managed 6.1% of the assets of 299 companies. These add up to an astounding total of US$3 trillion in 2009 alone.
BlackRock acts as a fund manager, handling investors’ funds to purchase and handle shares in the many companies in which it has a stake. In basic terms rather than purchasing shares for itself, Blackrock utilizes control of the funds it manages. In fact, over 85% of the company’s share ownership is through the funds it handles. Following quite behind, one finds AXA with 3.4%, JP Morgan Chase with 3%, and Capital Group with 2.5%.
Six of the top 10 private shareholders resided or at the very least originated from the US, with 10 from the top 21 having the same faith. So, how can one invest and take part in owning shareholdings?
Unfortunately, you cannot know exactly what companies such as BlackRock are investing in. However, you can find some good stocks to purchase nonetheless with a little research.
Share Control Patterns
Three major indicators revealed a variety of diverse share control patterns:
- As a percentage of the total value of the company’s shares held by the shareholder;
- Any business in which one shareholder has the greatest stake; and
- Companies that had at least one shareholder in the top five positions.
We call the second and third of these indications “precedence” measurements.
Capital Group and BlackRock were noteworthy for both having a broad impact and profound influence through strong precedent. As a result, they were generally the top and or second-ranked shareholders in many different firms.
BlackRock also placed in the top five for 55% of its shareholdings, and Capital Groups’ shareholding placed the same for 45%. However, BlackRock did not own more than 15% of any of the world’s largest corporations. There was just one instance where Capital Group was found with a high percentage of stock.
Private-sector share controllers with 15% or more of the company’s stock were few and few between. The wealthiest 15 percent of shareholders comprised less than 56% of all very big firms. Less than one in every ten of these companies had majority ownership of less than five percent.
As an alternative, numerous businesses placed little value on having a dominant position. In addition, they steered clear of having disproportionately huge stakes. BPCE and Societe Generale, two of Europe’s largest shareholding companies, have less than 5% of their shares in the prominent very big business valued at less than $5 per share. Most valued at less than one percent.
As a result, European share handlers may have been less aggressive in their efforts to gain a firm grip on their holdings.
The Implications
Markets became more financialized because of credit default swaps, collateralized debt obligations (CDOs), and derivatives becoming more commonplace.
The financialization of ownership is less clear. Lending money to companies for growth is not the only function of financial capital. Its effects on stock prices indicate whether a company’s management is successful or unsuccessful. The corporations are owned and controlled by finance capital.
Financing capital as distinguished from other forms of investment, such as industrial investment, is valuable in some areas but inaccurate in others. Industrial capital is practically and ultimately a kind of financial capital.
If it was ever possible at some point in time for just a handful of families or individuals to control the largest public firms in the world, long ago has that period passed. Moreover, it is no longer possible for that to be the case. In the modern world, firms that adhere to the rules that finance capital, or “the reasoning of money,” rule the roost.
Conclusion
The biggest companies in the world — although not owned single-handedly by the biggest shareholders ― do offer quite an insight into how corporations look to gain financial control. With Blackrock, the goal seems to be putting their fingers in as many pies as possible while owning a huge share. Capital Group also tends to follow the same strategy when it comes to shareholding. Moreover, it seems to be working. After all, BlackRock is the largest shareholder in the world.
Although the other largest shareholders are non-comparable to BlackRock, they still do hold a significant amount of shares with many different companies. Unlike Blackrock, the other shareholders believe in lighter shareholdings but with more companies.
