Universal Ownership

40 Pages Posted: 29 Dec 2022 Last revised: 6 Feb 2023

See all articles by Ofer Eldar

Ofer Eldar

Duke University - School of Law and Fuqua School of Business; European Corporate Governance Institute (ECGI); Duke Innovation & Entrepreneurship Initiative

Rory Van Loo

Boston University - School of Law; Yale University - Yale Information Society Project

Date Written: December 28, 2022


Market concentration and weak competition do not just lead to lower efficiency, but also result in corporate profits flowing primarily to wealthy households that own a disproportionate share of public corporations. We demonstrate that this is a growing distributional problem not only due to familiar reasons in the literature, most notably shifts in market power, but also due to changes to the socio-economic makeup of ownership. Over the past twenty years, households in the bottom 90 percent of wealth have seen their share of stock ownership decline by half. That is, the ownership of corporations has become increasingly concentrated among the wealthy at a time when corporations are arguably extracting ever more surplus from consumers and workers.

This Essay seeks to situate the distribution of ownership at the center of policies to address the impact of declining competition. The gist of our proposal is that policies to reverse existing trends by broadening the ownership of public corporations to middle and low-income households may help mitigate the harmful consequences of market power. The general objective of such policies would be to bring the distribution of ownership closer towards universal ownership of corporations by the public.

Universal ownership is desirable for two main reasons. First, the simplest effect of universal ownership would be to enable a broader array of stakeholders to benefit from the excess profits earned by firms in concentrated markets. Second, we demonstrate theoretically that if corporate stakeholders, particularly consumers and workers, own shares in public corporations, managers may offer more competitive prices and wages, to the extent that managers internalize the interests of their owners. Accordingly, policies to promote universal ownership of corporations can potentially achieve the same welfare goals that were long confined to other policy areas.

A major advantage of universal ownership is that it does not seek to challenge the existing corporate governance paradigm, which focuses on enhancing accountability of managers to owners. Rather it reinforces it by changing the ownership makeup of corporations. While there are practical challenges with implementing universal ownership, given the imperfections of standard policy responses to declining competition--such as stronger antitrust enforcement or regulation--our proposal could serve as a complimentary policy tool to existing approaches, and offers potentially consequential advantages.

Suggested Citation

Eldar, Ofer and Van Loo, Rory, Universal Ownership (December 28, 2022). Duke Law School Public Law & Legal Theory Series No. 2023-05, European Corporate Governance Institute - Law Working Paper No. 677/2023, Available at SSRN: https://ssrn.com/abstract=4314246 or http://dx.doi.org/10.2139/ssrn.4314246

Ofer Eldar

Duke University - School of Law and Fuqua School of Business ( email )

210 Science Dr
Durham, NC 27708-9985
United States
27705 (Fax)

European Corporate Governance Institute (ECGI) ( email )

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

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Rory Van Loo (Contact Author)

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Yale University - Yale Information Society Project

127 Wall Street
New Haven, CT 06511
United States

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