The Elfenworks Center for the Study of Fiduciary Capitalism
Overview
Corporate Governance, Fiduciary Capitalism and Universal Owners
Economic Externalities
Norm Shifts
Sustainable Economic and Social Development
Fiduciary Responsibility and Sustainability
Economic Externalities
Most importantly, a universal owner’s cumulative long-term return is determined not merely by the performance of each individual firm it owns, but by the performance of the economy as a whole. This has at least two potentially important consequences. First, it means that when universal owners evaluate the behavior of the firms they own, one significant dimension should be how each firm’s activities affect both other holdings in its portfolio and hence the returns earned by other firms in their portfolio. The universal owner captures positive externalities generated by firms and is harmed by their negative externalities.
A second consequence is that universal owners come to occupy a quasi public policy position as having an economic interest in the long-term health and well-being of society as a whole. The universal owner’s unusual position suggests they have an interest not only in standard macroeconomic policy issues, but more specifically in regulatory policy and the provision of public goods such as education and health, tort law, and infrastructure generally, both physical and human.
