Monopoly #2

Why waste words when the numbers speak for themselves? However, a little explanation may be useful in this case. *

The numbers in the table below are taken from a study of some 43,000 international companies in 2007. That means some of the information is now a little dated, with the demise of Lehman Brothers being one example. However, the broad picture remains and it is one showing that the top 50 companies 'controlled' (ie had ownership of 50% or more of the equity in) some 40% of the network of 43,000. US monopolists account for nearly half of the entries in the table, but the UK is second in line.

Analysing these relationships is complicated since it must take into account the common fact that company A owns a share of company B; B also owns a share of company C, and C may also own a share of the equity in A and B. Such relationships are open to network analysis, however, and the results show the concentration of power in a core group of companies, of which these are the top 50.

Most of the corporations listed are in the financial sector, a fact that illustrates both how equity markets enable the centralisation of ownership through cross-shareholdings, mergers and takeovers, and how financial companies are at the centre of this relationship nexus. I have some qualms with the view that this means actual control, however. There may be an accumulation of relatively small shareholdings by a wide range of subsidiaries and loosely linked companies, so that implementing control may prove to be difficult, even if it were attempted. Furthermore, if 20 separate financial institutions owned 60% of a particular company's equity, they will not necessarily act as a group. Nevertheless, this does not change the picture of monopolistic ownership of the world's companies.

A different issue that could upset the calculation either way, and I do not think this was (or could have been) allowed for in the study, is that owning 1% of the equity does not necessarily give 1% of the voting rights. It may give more, or even zero, voting power, depending on the type of equity. Take Facebook's Zuckerberg as an example: he is reported to own 18% of the company's shares but has more than 50% of the voting rights.

The original study giving the method behind the analysis and some more information on the work done is found here.

For those who may frustrated with the way that mathematics is often used to obscure economic relationships, let this stand as one of the rare examples where it elucidates them!

Rank	Company name	Country	Cumulative % network control
1	Barclays Plc	GB	4.1
2	Capital Group Companies, Inc	US	6.7
3	FMR Corp	US	8.9
4	Axa	FR	11.2
5	State Street Corp	US	13.0
6	JP Morgan Chase & Co	US	14.6
7	Legal & General Group Plc	GB	16.0
8	Vanguard Group Inc	US	17.3
9	UBS AG	CH	18.5
10	Merrill Lynch & Co	US	19.5
11	Wellington Management Co LLP	US	20.3
12	Deutsche Bank AG	DE	21.2
13	Franklin Resources Inc	US	22.0
14	Credit Suisse Group	CH	22.8
15	Walton Enterprises LLC	US	23.6
16	Bank Of New York Mellon  Corp	US	24.3
17	Natixis	FR	25.0
18	Goldman Sachs Group Inc	US	25.6
19	T Rowe Price Group Inc	US	26.3
20	Legg Mason Inc	US	26.9
21	Morgan Stanley	US	27.6
22	Mitsubishi UFJ Financial Group Inc	JP	28.2
23	Northern Trust Corp	US	28.7
24	Société Générale	FR	29.3
25	Bank Of America Corp	US	29.8
26	Lloyds TSB Group Plc	GB	30.3
27	Invesco Plc	GB	30.8
28	Allianz Se	DE	31.3
29	TIAA	US	32.2
30	Old Mutual Plc	GB	32.7
31	Aviva Plc	GB	33.1
32	Schroders Plc	GB	33.6
33	Dodge & Cox	US	34.0
34	Lehman Brothers Holdings Inc	US	34.4
35	Sun Life Financial Inc	CA	34.8
36	Standard Life Plc	GB	35.2
37	CNCE	FR	35.6
38	Nomura Holdings Inc	JP	35.9
39	The Depository Trust Company	US	36.3
40	Massachusetts Mutual Life Insurance	US	36.6
41	ING Groep NV	NL	37.0
42	Brandes Investment Partners LP	US	37.3

43	Unicredito Italiano Spa	IT	37.6
44	Deposit Insurance Corporation Of Japan	JP	37.9
45	Vereniging Aegon	NL	38.3
46	BNP Paribas	FR	38.6
47	Affiliated Managers Group Inc	US	38.9
48	Resona Holdings Inc	JP	39.2
49	Capital Group International Inc	US	39.5
50	China Petrochemical Group Co	CN	39.8

Source: Vitali S, Glattfelder J B, Battiston S 2011, ‘The Network of Global Corporate Control’, PLoS ONE 6(10): e25995. doi:10.1371/journal.pone.0025995

Notes: 'Home countries' of the corporations are shown by their 2-letter ISO code. Note that CA is Canada, CH is Switzerland and CN is China.


Tony Norfield, 19 August 2013

* Clarification note, 20 August 2013: Vitali et al's document makes a clear distinction between ownership and control. To clarify, the table above gives figures for control, not ownership. The control estimate is based on owning 50% or more of the equity and thus having control over a company's decisions. In an extreme case, owning 50.1% of equity would give 100% control. Hence, the measure of control will overstate the actual figure of ownership. So these top 50 companies do not own nearly 40% of the network of corporations, although, by their measure they control nearly 40% of them.