The Corporate Governance Cartel

In recent years, major institutional investors in the U.S. have combined their efforts on environmental, social, and governance (“ESG”) matters. Large institutional investors now vote in lockstep on a variety of corporate issues, jointly lead governance initiatives, and often adopt mutually supportive stances on social and environmental campaigns. This unprecedented cooperation has been boosted by the emergence of institutional investor consortia – advocacy groups and trade associations that represent their members’ collective interests. Chief among these organizations are the Council of Institutional Investors (CII), a trade association that represents asset managers, pension funds, and union funds with combined assets of … Read more

How Common Ownership Can Lead to Tax Avoidance

In recent years there has been a surge in research that explores the sources of variation in corporate tax avoidance. Following this stream of research, tax scholars have begun to acknowledge the potential effect of ownership patterns on firms’ tax behavior.[1] A few recent empirical studies have examined the effect of institutional ownership, particularly quasi-indexers, on the tax behavior of portfolio firms.[2] These studies found a significant positive correlation between tax avoidance and institutional ownership, indicating that the emerging ownership structure in the U.S. economy – common ownership – plays an outsized role in instances of corporate tax … Read more