Big Three Power, and Why it Matters by Lucian A. Bebchuk, Scott Hirst published by Boston University Law Review (12/2022).
This Article focuses on the power and corporate governance signifi[1]cance of the three largest index fund managers commonly referred to col[1]lectively as the “Big Three.” We present current evidence on the substantial voting power of the Big Three and explain why it is likely to persist and, indeed, further grow. We show that, due to their voting power, the Big Three have considerable influence on corporate outcomes through both what they do and what they fail to do. We also discuss the Big Three’s undesirable incentives both to underinvest in stewardship and to be excessively defer[1]ential to corporate managers. In the course of our analysis, we reply to responses and challenges to our earlier work on these issues that have been put forward by high-level officers of the Big Three and by a significant number of prominent academ[1]ics. We show that these attempts to downplay Big Three power or the prob[1]lems with their incentives do not hold up to scrutiny. We conclude by dis[1]cussing the substantial stakes in this debate—the critical importance of recognizing the power of the Big Three, and why it matters.
