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Our modern version of shareholder capitalism is a curious institution.

The shareholders of public corporations are their owners, which would lead you to believe they have a say in how the entity they control operates. But in reality, it’s not quite like that.

The Funds That Own Our Companies

Unlike privately owned companies in which the largest shareholders call the shots, in public companies the largest shareholders are usually faceless mutual fund companies that own the shares on behalf of investors who own shares in mutual funds or exchange-traded funds. Most of the time, owners of broad-based mutual funds likely don’t know or don’t care which stocks are included in the fund (this is our hunch; it’s not backed by definitive research), so they have little to no interest in any one company’s management policies – as long as the stock price isn’t affected.

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