The egregious corporate scandals in the headlines last year have highlighted the need for responsible oversight by corporate boards and shareholders alike to check the behavior of management. So, as we look for solutions to corporate governance problems, we should not forget that every individual who owns stock has a role - perhaps a small one, but an important one.
Yet the growth in households' equity ownership has come with an ironic twist: While more households own shares of corporations, many of the new stockholders are unable to play a role in corporate governance. Why? Because Americans have largely purchased their shares through pension funds, mutual funds, insurance companies, and other financial institutions.