The quiet power of the Big Three: a new era of corporate governance

We are witnessing a quiet but seismic shift in corporate governance. Behind the headlines of stock prices and board reshuffles, a powerful trio of asset management giants – BlackRock, Vanguard and State Street Global Advisors (SSGA) – has quietly become the most influential force in the corporate world.

Known collectively as the ‘Big Three’, these firms are now shaping the strategies, structures and leadership of companies across the globe, all too often in ways that are invisible to the public and even to the businesses they influence.

This isn’t just about who owns what. It’s about who decides what.

Too big to ignore

As of Q1 2024, BlackRock managed a staggering $10.5 trn in assets. Vanguard wasn’t far behind with $9.3 trn, while State Street managed $4.3 trn. Together, they now control over 20 percent of the total market capitalisation in the US and own about 25 percent of voting shares in corporate America. This makes them the largest shareholders in 88 percent of S&P 500 companies.

Their reach is global: in the UK, they hold 16.4 percent of the market; in Ireland, 19 percent; in Australia, 13 percent; and in 16 other markets, from Japan to Brazil, they hold at least 5 percent of listed equities.

This concentration of financial firepower is changing the fundamentals of corporate governance – and IROs need to pay close attention.

We’re entering a new and challenging era. Traditional models of corporate governance – based on diverse shareholder voices, competitive voting and managerial independence – are being reshaped by the gravitational pull of these investment behemoths.

At the heart of this change lies the rise of passive investing. The Big Three are champions of index-based funds, which track stock indices rather than chasing performance through stock picking. That means they rarely sell. They’re permanent owners and that permanence comes with influence. But it’s influence of a unique kind.

Voting power and hidden influence

Because they hold shares in almost every major corporation, the Big Three command extraordinary voting power in board elections and corporate resolutions. Their presence can make or break leadership decisions.

But even more potent than their formal voting rights is their ‘hidden power’, the subtle sway they exert behind closed doors.

Unlike activist investors who make headlines with bold public demands, the Big Three prefer quiet, confidential engagement with CEOs and boards. These off-record conversations often steer corporate strategies long before any resolution hits the annual meeting agenda.

Executives, conscious of their shareholders’ heft, increasingly pre-empt the Big Three’s expectations, aligning business plans to their preferences. This subtle form of influence, while less visible, is arguably more profound.

A double-edged sword

For IROs, the Big Three represent a very real paradox. On one hand, they provide long-term capital stability. Unlike short-term investors chasing quarterly returns, the Big Three promote sustainable strategies, sound governance and responsible leadership. They’ve often championed diversity in leadership, ESG principles and ethical risk management.

On the other hand, their dominance poses real governance risks:

• Accountability gaps: Despite their rhetoric around stewardship, the Big Three are often reluctant to challenge management. Studies show they vote less often than other institutional investors against excessive executive pay or underperformance.
• Conflict of interest: Their financial relationships with investee companies – via lending, advisory and custodial services – may compromise their objectivity.
• Homogenization of governance: With so much control consolidated in so few hands, there’s a risk of groupthink and systemic vulnerability, especially if policies prioritise portfolio-wide risk mitigation over company-specific nuance.

The Big Three also often prioritise what’s best for their overall portfolio, not necessarily what’s best for your individual firm.

What IROs need to do now

The influence of the Big Three is not going away. So how should CEOs, chairs and IR professionals respond?

Here are four key steps to navigate this new landscape:

1. Understand their priorities

The Big Three consistently back long-term value creation, sustainability and sound governance. Their stewardship teams publish annual letters and voting guidelines. Familiarise yourself with their positions and be proactive in aligning with them – without surrendering your independence.

2. Engage, don’t react

Even if their meetings are discreet, the Big Three are open to dialogue. Establish regular, transparent communication. Share your strategic goals, ESG initiatives and governance approach early and often. Make it easier for them to support you.

3. Balance all stakeholders

Yes, the Big Three are major stakeholders in your company – but they’re not the only ones. Don’t neglect family owners, state investors, private equity backers or your workforce. A truly resilient governance strategy balances these voices.

4. Track regulatory shifts

The regulatory spotlight is intensifying. From the SEC in the US to the FCA in the UK, regulators are increasingly focused on the outsized role of institutional investors. Stay alert to reforms that could affect how shareholder influence is disclosed and exercised.

A tipping point in global governance

Much remains opaque about how the Big Three wield their power. Each firm differs in structure and culture but they share investment philosophies and operational models that make their influence structurally similar.

Their rise has triggered broader questions:

• How do they interact with activist investors, governments and regulators?
• What role do they play in shaping policy agendas, industry standards and boardroom norms?
• Where’s the line between shareholder engagement and shadow governance?

These questions go to the heart of corporate accountability and democratic oversight in modern capitalism.

The age of widely dispersed shareholder capitalism is over. We’re now in a world of concentrated institutional ownership – and corporate leaders must adapt.

The Big Three are not the enemy. In fact, they can be powerful allies for firms that prioritise long-term thinking and stakeholder balance. But their influence must be understood, managed and – where appropriate – challenged.

Corporate leaders need the skill to practically engage with asset managers while maintaining strategic autonomy. That means being transparent without being beholden, responsive without becoming reactive.

In this new governance era, success depends not just on delivering quarterly results, but on navigating the invisible power structures that shape boardroom decisions across the globe.

The Big Three aren’t just watching; they’re shaping your future. It’s time to pay attention.

Andrew Kakabadse is professor of governance and leadership at Henley Business School. Dr Reeves Knyght is chair of Minerva Lending and a governance advisor.

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