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The remarkable performance of U.S. and European equity markets since the early 1980s not only contributed to the popularization of stock options in executive pay packages, but also to the increase in stock ownership by households in many countries. This is not to say that many U.S. and non-U.S. households have become active investors in individual equities. What has happened is that growing segments of the population are becoming shareholders through mutual funds and retirement programs. Among the most vocal proponents of shareholder value are the managers of major retirement systems, such as the California Public Employees Retirement System, which has $130 billion in assets under management, a large part of which is in equities.
Equities are by far the largest asset class in which pension funds are invested in the United States and the United Kingdom, with 58 percent and 76 percent, respectively, in 1996. The difference compared to countries like Germany, with 8 percent, and Italy, with 3 percent, is quite striking. But the situation in these countries is changing rapidly, with an increasing proportion of pension assets moving into equities. A shareholder culture seems to be developing in many European countries. This has been prompted partly by privatization of large government monopolies in areas such as telecommunications, where governments became active marketers of the shares of these companies. Noteworthy was the German ”Deutschland Aktienland” (Germany: Country of shares) campaign in support of the privatization of Deutsche Telekom. The subsequent strong performance of the shares of the privatized companies gave a boost to the popularity of stock investment in these countries.
While in 1975, 25 million people, representing 12 percent of the population, owned equity shares, by 1995 this number had surged to 69 million and 26 percent, respectively. Under these circumstances, the old notions of labor versus capital are losing currency. No longer is the shareholder someone else: The shareholder is us. As a consequence, the ideological tension that fired the debate on shareholders versus stakeholders is diminishing. With more and more people as shareholders, the support for shareholder value as the objective function for a corporation is gaining momentum.