John Coates, a professor of Law and Economics at Harvard Law School, discusses the concentration of power in the financial sector through the growth of index funds and private equity funds. Coates explains that these financial institutions have grown to control significant portions of the US economy, with private equity controlling between 15 and 20%, and index funds owning up to 30% of all stock on the exchange. Coates specifically addresses the role of private equity in investing on behalf of the broader public, particularly in pension funds, and the lack of transparency and accountability in its operations. The top four index funds own a large percentage of every company’s stock. Coates raises concerns about how these institutions will use their power to influence companies’ social impacts and the potential consequences for society and the political system.
Coates argues that disclosure rules for private equity-owned businesses, which are currently lacking in the US compared to other countries, could help increase legitimacy and accountability in the industry.