Recently a radio ad playing in my area tries to gain sympathy for the oil companies by claiming that oil stock is actually owned by schoolteachers, firemen, etc., etc., attempting to deflect criticism of high profits at the expense of the average American.
Is there any research at all that shows who really owns these stocks? I would imagine that a large amount of it is owned by institutional investors including mutual funds, so utlimately some oil stock is probably in some construction worker’s 401(k). But my guess is most of it is owned by the oil executives, investment banks, foreign investors, and other high rollers.
Well, one fact to start with is that those “high profits” can be dissected 3 ways to Sunday. They are large in absolute terms because the companies are large. They are modest in relative terms if the relative term you choose is ordinary profit margin–Exxon, for instance, had a 2007 profit margin of 7.5% against revenues; somewhat lower than the 9% of all US non-auto manufacturing, for instance. One thing that isn’t happening is that the oil companies are selling stuff for some outlandish margin. Exxon sells a dollar’s worth of stuff and nets 8 cents or so. Now if you decide instead to use return on shareholder equity, then Exxon is a little north of 33%. ROE might be a better way to get the numbers you are looking for if you want to wail about oil industry profits, but like baseball, almost any numbers can be manipulated somehow to advance your cause. And ROE is nearly useless in comparing companies not in the same sector. Polloi Pete’s Good Idea would have a (sinfully?) huge ROE if it didn’t cost him much to execute it.
Who owns Exxon? All of the suspects you mention. Onership is ordinarily divided into three types: Insiders (Executives, etc), Institutions, and Individuals who aren’t Insiders. It’s tough to parse out the Institutions, which is what you are driving at, I think. http://finance.yahoo.com/q/mh?s=XOM The oil companies argue that because stock ownership is open to all, and because so many individuals take advantage of that–directly or indirectly–everyone owns them. They are right. Mr Tillerson (the CEO) might have around a million shares, but that pales in comparison with Barclay’s which owns almost a quarter billion shares.
More importantly, everyone may avail themselves of the opportunity to own them. Think the oil companies are the modern day robber barons? That’s the great thing about capitalism. Mr Little Guy gets a cut! Go sell all your crap, mortgage the rest to the hilt (might be a little late on that ) and Buy Big Oil. Hurry. If you had bought it 2 years ago at $68, you’d already be up $10/share. I hope you didn’t buy it a year ago–in that case you’re down $15/share.
Just for the record, I am a capitalist and do not begrudge any company the ability to use the supply and demand curve. So we can set aside any further debate as to whether oil companies are price gouging (or even whether there is such a thing as price gouging in a free-market economy).
I am interested only in whether it’s possible to objectively determine the veracity of the ad with regard to stock ownership.
Finally, someone is discovering that evil corporations are actually owned by you and me.
But really, every big corporation would like to know this: who owns their own stock? Only certain classes of investors are required to disclose themselves, based on the size of their shares, acquisition and disposition dates, and other investment activities.
Certainly large institutions (such as investment banks) own large amounts of the oil stocks. But then who owns them, and whose investment is it in the end?
And of course, the more shares you own, the more profit you make. But as a percentage per same-class-of-share, everyone makes the same profit. Even a plumber.
I’m glad you’re asking. I wish more people realized that the corporations aren’t just 10 evil guys in a board room. Except for some privately-held, not-publicly traded corporations.
From it’s own website, Sonecon, LLC, is an economic advisory firm that provides in-depth analyses and unique insights into changing economic conditions in the United States and around the world and the impact of government policies on those conditions and the prospects for particular industries.
Someone from Sonecon produced a report in September 2007. It contains the following wisdom:
The above figures, given in the conclusion, don’t quite stack up with numbers given earlier in the report, but that’s probably because my comprehension skills are lacking.
Of the 70% share owned by institutional investors, I’d guess from reading the report that 60% belong to asset management companies, so one might argue that ‘middle-class American households’ account for the vast majority of oil and gas company shares.