ABSTRACT
Institutional investors - primarily pension funds - control close to 40 percent of the common stock of the country's large businesses. The largest and fastest-growing funds, those of public employees, are no longer content to be passive investors. Increasingly, they demand a voice in the companies in which they invest - for instance, a veto over board appointments, executive compensation, and critical corporate charter provisions. The rise of pension funds as dominant owners and lenders represents one of the most startling power shifts in economic history. America's failure, until quite recently, to recognize this power shift accounts in large measure for much of the financial turbulence of the 1980s - the hostile takeovers, the leveraged buyouts, and the general restructuring frenzy. Pension funds first emerged as the premier owners of the country's share capital in the early 1970s. Pension funds cannot be managers as were so many nineteenth-century owners.
