A decade ago, hopes were high in some circles that pressure from the new, large, economically-powerful institutional shareholders, like BlackRock, for more corporate social responsibility—on issues like climate change, the environment, and justice—would become a major feature of the corporate landscape and move the American corporation to do what government was not doing. That hope arose because incentives emanating from America’s shareholding structure had shifted when firm-by-firm investments by large shareholding institutions evolved to market-wide, across-the-economy investments in very large portfolios. Institutional investors of this sort no longer picked stocks; they invested broadly across the stock market and the American economy. In some circles that ownership structure looked to be creating incentives for financial institutions with wide ownership to pressure the American corporation to benefit the economy overall, and not just boost the profits of their portfolio companies. In CSR circles, hopes were high that the new universal owner had incentives to fulfill social responsibility gaps seen as having been left by government.

For example, investors with across-the-economy ownership had more reason to make their companies internalize externalities; if one firm in the portfolio profited at the expense of another firm, the new investor’s profit in one would be offset by the loss in the other firm. And turning from government regulation to private pressure was needed, said many analysts and activists, because of our broken government. With deadlocked government a dead-end, the CSR and ESG movements sought to pressure large institutional shareholders in corporate America toward social progress.

Many in the new shareholder class of universal owners indeed bought into the new corporate social responsibility playbook and pressed corporate America for more socially responsible action.

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