Today’s post addresses the increasing influence of institutional shareholders on executive pay. Prior posts have examined the role of proxy advisors in giving advice on how shareholders, especially institutional shareholders, should vote on say-on-pay under Dodd-Frank Section 951. [1] Today’s discussion focuses on the institutional shareholders themselves.

While institutional shareholders own a major portion of the share value of U.S. public corporations, the “ultimate owners” are, to a large extent, millions of individuals for whose benefit the equity in these corporations is being held by the institutional shareholders. (These individuals will be referred to in the post as “ultimate owners.”)

The original setting-aside of the assets that are the source of these investments is made by the individuals themselves or by others on their behalf (such as by their employers). These assets of the ultimate owners are being held for purposes such as educating children, providing for retirement, protecting against casualty and providing health and life insurance.

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