Former World Bank lawyer and whistleblower, Karen Hudes
, in a recent interview with AND Magazine
hinted towards a network of global whistleblowers, who work within our global financial markets; and who have been busy working with professionals within the sociology and political science fields, to put together revolutionary studies to provide transparency to our corporations and markets, to expose widespread corruption and collusion.
What has been revealed from this collective's research are numerous first of their kind studies examining the spread of corporate influence over our global markets and other corporations. "The network of global corporate control
" a study performed by the Chair of Systems Design, at ETH in Zurich, Stefania Vitali, James B. Glattfelder, and Stefano Battiston, shines a much-needed light on "the structure of the control network of transnational corporations"; along with how such structures pull us away from a free market, compromise competition, and impair financial stability for all of us.
Since the bulk of us on planet earth live in a place where financial markets reign supreme, I implore you to read the study, but just in case you don't get a chance here are some of the highlights I found especially insightful.
But first, what is a "control network of transnational corporations", and how do they influence markets? The easiest way to think about it is to imagine a large transnational corporation, General Electric for instance, and now imagine all of GE's sister companies or strongly connected components (SCC), domestically and internationally, now imagine all the ownership relationships direct and indirect that web of companies have, known as connect components (CC), largest connected components (LCC), and other connected components (OCC), all stemming originally from General Electric, and essentially controlled and influenced by General Electric.
Now imagine a large financial corporation (i.e. Barclays), and imagine all of Barclays's connected components and their relationships with a company like General Eclectic and all of their components. What becomes apparent in the study referenced above, which looked at over 40000 transnational corporations is that these webs of ownership showed "'3/4 of the ownership of firms in the core remains in the hands of firms of the core itself. In other words, this is a tightly-knit group of corporations that cumulatively hold the majority share of each other.
" And the biggest of these transnational corporations sit at the core of our global markets making them a "super-entity".
Now imagine this "super-entity" of a few hundred transnational corporations', and imagine their highest paid members, and imagine their portfolio of stocks they own, perhaps stocks in rival corporations in the same industry. What becomes clear is that widespread corporate control can impair competition, but also destroys the stability of markets and life on the ground for millions of laborers.
"This means that they (large transnational corporations) do not carry out their business in isolation but, on the contrary, they are tied together in an extremely entangled web of control. This finding is extremely important since there was no prior economic theory or empirical evidence regarding whether and how top players are connected."
The study also showed that an even smaller network of transnational financial firms holds tremendous sway and influence over numerous other industries not related to banking through investment vehicles such as stocks, bonds, and mutual funds. These transnational financial corporations use their tremendous ownership in shares of other corporations to influence their behavior and strategic decisions.
Karen Hudes studied law at Yale Law School and economics at the University of Amsterdam. She worked in the US Export Import Bank of the US from 1980-1985 and in the Legal Department of the World Bank from 1986-2007. She established the Non Governmental Organization Committee of the International Law Section of the American Bar Association. | Photo: |
"Our results show that, globally, top holders (in financial institutions) are at least in the position to exert considerable control, either formally (e.g., voting in shareholder and board meetings) or via informal negotiations
"For example, a mutual fund owning some percent of a large corporation may try to impose job cuts because of a weak economic situation. This can happen: (i) without voting and (ii) although the fund does not plan to keep these shares for many years. In this case, the influence of the mutual fund has direct impact on the company and its employees. Furthermore, mutual funds with shares in many corporations may try to pursue similar strategies across their entire portfolio
It is pretty easy to see such things taking place in our economy, but almost impossible to prove, and without further transparency measures for corporations to disclose their owners and shareholders, networks of strongly colluded parties can control global markets without oversight or taking responsibility.
"As a result, the shareholders with a high level of control are those potentially able to impose their decision on many high-value firms. The higher a shareholder's control is, the higher its power to influence the final decision. In this sense, our notion of control can be related to Weber's definition of 'power', i.e. the probability of an individual to be able to impose their will despite the opposition of the others
Most importantly, this study reveals that corporate control of our markets is not some conspiracy, but a real occurrence that has a real damaging effect on competition in our markets, and a reminder that when we vote for corporate backed politicians, corporate control only grows stronger.