The Future of Corporate Governance Part I: The Problem of Twelve

23 Pages Posted: 3 Oct 2018 Last revised: 14 Mar 2019

See all articles by John C. Coates, IV

John C. Coates, IV

Harvard Law School; European Corporate Governance Institute (ECGI)

Date Written: September 20, 2018


Three ongoing mega-trends are reshaping corporate governance: indexing, private equity, and globalization. These trends threaten to permanently entangle business with the state and create organizations controlled by a small number of individuals with unsurpassed power. The essay focuses on indexation. After providing background, the essay describes the rise of and reasons for indexation, noting that “passive” indexed investing takes a variety of forms. Data on indexation are presented — with the bottom line that indexation has progressed farther than most realize, because foreign ownership, institutional indexation, and “closet” indexation are often neglected by observers. Index providers’ incentives, resources, and methods are reviewed, with an emphasis on the how such providers have greater practical importance than simpler analytical approaches might suggest. The essay ends with an outline of policy options, and preliminary analyses of which seem likely to address the “Problem of Twelve” — the likelihood that in the near future roughly twelve individuals will have practical power over the majority of U.S. public companies.

Keywords: Index Funds, Indexation, Corporate Governance, Passive Investment

JEL Classification: G23, G34, K22, K23

Suggested Citation

Coates, John C., The Future of Corporate Governance Part I: The Problem of Twelve (September 20, 2018). Harvard Public Law Working Paper No. 19-07, Available at SSRN: or

John C. Coates (Contact Author)

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics