Asset Manager Capture

One of the most significant corporate governance developments of the past half-century is the rise of asset managers with large ownership stakes that provide them with outsized influence over public companies. As asset managers have grown in size, concerns about their potential to capture the government and secure favorable regulation have increased as well. In this Article, however, we describe an equally important risk that runs in the other direction: large asset managers are vulnerable to “reverse capture,” whereby government actors can pressure them to deploy their governance power in service of the government’s agenda.

This dynamic has intensified as presidential power has expanded over several decades. Expanded presidential authority not only enables administrations to bypass legislative and independent agency processes for regulating asset managers but also allows the White House to harness asset managers’ quasi-regulatory power to promote its agenda. These dynamics have implications not only for U.S. corporate governance and asset manager fiduciary duties, but also for global investors who rely on American asset managers. They also pose a democratic concern: government actors may increasingly pursue policy through concentrated private intermediaries rather than through more transparent and accountable channels.