New Research on Global Corporate Control

Ladislau Dowbor[1]

January 3,  2012


“There is a big difference between suspecting the existence of a fact

and in empirically demonstrating it”[2]


We have all followed, for decades in a row, the news about large companies buying one another, forming increasingly larger groups, in theory to become more competitive in the increasingly aggressive international market environment. The process, naturally, has its limits. In general, in the main production chains, the race ends when there are few companies at the top. Instead of being at war, they find out that it is more convenient to mix competition with collaboration, for their mutual advantage. Not necessarily, as it is obvious, for the good of us all.

Controlling a production chain in an organized manner naturally generates large economic, political and cultural power. Economic through the immense resource flow – bigger than the GDP in numerous countries –,  political through the appropriation of a large portion of the public decision process, and cultural by the fact that the global mass media creates, through heavy propaganda campaigns, a consumer culture and behavior that favors corporations, generating an overall loss of balance between corporate muscle and the essential but less focused interests of society.

A basic characteristic of corporate power is how little it is known. The United Nations had a department, UNCTC (United Nations Center for Transnational Corporations), which published in the 90s an excellent annual report. With the creation of the World Trade Organization, the UNCTC was closed down and so were the publications. Thus what is probably the main organized core of global power simply ceased to be studied, except for occasional scattered research by academic institutions, and fragmented by country or by economic sector.

The most significant overview we have today about corporations is the excellent documentary The Corporation, a high level scientific study, which in two hours and twelve chapters shows how they work, how they are organized, and what impacts they have. Another excellent documentary is Inside Job, which took the documentary Oscar for 2011, and shows how the financial segment of corporate power works, centered on the workings of the current financial crisis. We also have the classic in this segment: When Corporations Rule the World, by David Korten. Studies of this kind allow us to understand the overall logic, but are far from generating basic organized scientific data on the level of the magnitude of power they wield.

This leaves us in dire shortage for a systematic research on how corporations work, how decisions are made, who takes them, and with what legitimacy. The fact is that we ignore almost everything related to the main power structure on our little planet.

It is natural and healthy that we all have great concern in not inventing fiendish plots and evil conspiracies. But seeing how the activities in the main economic sectors are reduced to few extremely powerful companies at the top, we cannot continue to think that we are dealing with economic groups honestly competing on the marketplace, doing business, so to speak, and leaving politics alone. We were supposed to be dealing  with economic groups regulated by politically and democratically organized rules of the game. But what we curiously continue to call “the market” is in fact becoming the really existing political power, authors of the rules of their own game. Acting in the global space, in the absence of world government or significant multilateral governance, they wield their power without facing any significant control.

The research published by the Swiss Federal Institute of Technological Research (ETH)[3] brings us the first overall research on this global network of power. The methodology is transparent. They selected 43000 corporations in the 2007 Orbis database from more than 30 million companies, and began to study how they relate to each other: the economic weight of each entity, its network connections, financial flows, and how corporations wield power through indirect share-holding in other economic groups. In statistical terms, the result is a bow-tie topology, where we have a group of corporations in the “node”, branching out to one side pointing to the corporations that control the “node”, and to the other side pointing to companies the node controls.

The innovation is that we have the first overview and mapping of corporate control in the world, with a clear and neat methodology. Former nation-wide studies obviously could not cover the global links, and individual corporate studies could not map how a relatively smaller corporation could, through indirect control of other corporations, exert huge influence on how resources are used. The main corporations in the planet have been taken into account, What we have here is exactly what the research title shows: “the network of global corporate control.”

In ideological terms, the study is above suspicion. First of all, it is important to mention that the ETH from Zurich is part of the core of technological research capacity, on the level of such institutions as the MIT in the United States. Researchers at ETH hold 31 Nobel prizes, starting with Albert Einstein. The team that worked on the research  know their way around network mapping and the architecture of power that  results. Stefano Battiston, one of the authors, signs researches with J. Stiglitz, former World Bank chief economist. There is no ideological flag waving here. The 10 page basic paper is short for a survey of this scope, but it is accompanied by 26 pages of methodology, in order to make the process transparent. And at no moment do they don´t draw hasty political conclusions: they limit themselves to expose in a very systematic way the map of power that results, moderately pointing out the implications.

The research paper can be a little difficult to read for people not familiar with this kind of topology. Given its importance for the understanding of how world corporate control is organized, we are merely pointing, in the present review, to what we see as the major contributions. The link to the original paper can be found below.

The result of this research is clear: “The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic “super-entity” that raises new important issues both for researchers and policy makers.”(1)

In order to map the power concentration, the authors analyze the global structure of corporate control. Control is hereby defined as the participation of economic actors in the market shares, representing “the chances of seeing one’s own interest prevailing in the business strategy of the firm.” By drawing the whole participation web, one comes to the notion of network control. This notion defines the total amount of economic value on which an agent has influence.

The model analyzes the operational income and the economic value of corporations, detailing the mutual cross-shareholdings, identifying the units more closely connected within the network. “This kind of structures, so far observed only in small samples, has explanations such as anti-takeover strategies, reduction of transaction costs, risk sharing, increasing trust and groups of interest. No matter its origin, however, it weakens market competition. As a result, about 3/4 of the ownership of firms in the core remains in the hands of firms of the core itself. In other words, this is a tightly-knit group of corporations that cumulatively hold the majority share of each other.” (5)

This mapping, in turn, leads to the analysis of the concentration of control. At first glance, being companies with their shares in open market, we would imagine a relatively distributed control power as well. The study looked for “how much this control is concentrated and who are the top control holders.” This is an innovation relatively to the numerous previous studies that measured the concentration of wealth and income. According to the authors, there are no quantitative estimates about  control itself. The calculation consisted in identifying what fraction of players at the top hold more than 80% of all network control. The results are robust: “We find that only 737 top holders accumulate 80% of the control over the value of all TNCs” … “This means that network control is much more unequally distributed than wealth. In particular, the top ranked actors hold a control ten times bigger than what could be expected based on their wealth ” (6)

Combining the power of top-ranked actors and their interconnections, “we find that, despite its small size, the core holds collectively a large fraction of the total network control. In detail, nearly 4/10 of the control over the economic value of TNCs in the world is held, via a complicated web of ownership relations, by a group of 147 TNCs in the core, which has almost full control over itself. The top holders within the core can thus be thought of as an economic “super-entity” in the global network of corporations. A relevant additional fact at this point is that 3/4 of the core are financial intermediaries.”



Example of a few international financial connections. In red the European groups; in blue the North American ones; other countries in green. The dominance of the two first is evident, and coincides with the map of the present financial crisis. Only a small part of the links is shown here. Source: Vitali, Glattfelder e Fattiston,


The numbers themselves are very impressive, and are generating impact in the scientific world, and will inevitably reverberate in the political world. New Scientist, commenting on the ETH research paper, suggests that the protest movements, which refer to the 1% that plays with the resources of the other 99%, can have a good argument. New Scientist heard other scientists on their views concerning the ETH study, and quotes Glattfelder, one o fhte authors: “Indeed, less than 1% of the companies can control 40% of the entire network.” And most are financial institutions, including Barclays Bank, JPMorgan Chase & Co, Goldman Sachs and alike[4].

Andy Haldane, executive director of financial stability at the Bank of England in London, comments that the ETH study “gave us a tantalising glimpse of a brave new world for finance…Analysis such as ‘the network that runs the world’ is welcome because it represents a leap forward. A key ingredient for success elsewhere has been a common language and shared access to data. At present, finance has neither.” Haldane also comments on the huge scale of the problem: “The growth in certain financial markets and instruments has far outsripped Moore’s law of a doubling of computer power every 8 months. The stock of outstanding financial contracts is now around 14 times annual global GDP”.[5]

Some implications are quite obvious. Thus, although some comments on the ETH study stress that companies buy each other for business reasons and not to dominate the world, not seeing the connection between this concentration of economic clout and the resulting political power is evident proof of myopia. When many countries, from the Reagan and Thatcher years on, cut taxes on the rich, laying the foundations of the current growing global inequality and public debt, there can be little no doubt about the political power behind the initiatives. The law recently passed in the United States authorizing unregulated election campaign financing by corporations also has evident implications. The dismantling of laws that regulated financial intermediation and speculation would obviously be collaboratively supported by the “super-entity”, whatever their competing interests in other fields.

Another important conclusion refers to the systemic vulnerability of the global economy. When there are millions of companies, there is real competition, no one can “make” the market, dictate the prices, and much less dictate the use of public resources. What used to be called free market thus could find its balance through numerous minor adjustments of a great number of companies, ensuring a certain systemic resilience. With the current concentration of control in very few corporate giants, furthermore “tightly-nit” in the central nucleus, oscillations and volatility reach another dimension. For example, with derivatives in crisis, much of the speculative capitals are redirected to commodities, leading to sharp rises on prices, often attributed simplistically to raw material demand increase from China. The evolution in oil prices, in particular, is directly connected to these power structures.[6]

The authors present obvious and important implications for anti-trust rules management, as these policies operate only at the national level, while the corporate system operates in the global arena. “Antitrust institutions around the world  closely monitor complex ownership structures within their national borders. The fact that international data sets as well as methods to handle large networks became available only very recently, may explain how this finding could go unnoticed for so long”(7) In clear terms, these corporations act in the world, while regulatory instances are fragmented in 194 countries, not to mention the unregulated tax havens.

Another implication is the systemic financial instability generated. We used to say that the big financial groups are too big to fail. Seeing how they are interconnected, the image changes, it is the system that is too big and powerful for governments to curtail their privileges and restore stability. “Recent works have shown that when a financial network is very densely connected it is prone to systemic risk. Indeed, while in good times the network is seemingly robust, in bad times firms go into distress simultaneously. This knife-edge property was witnessed during the recent financial turmoil “(7).

As another key issue, the authors point to the effect of the financial power on other corporate areas. “According to some theoretical arguments, in general, financial institutions do not invest in equity shares in order to exert control. However, there is also empirical evidence of the opposite. Our results show that, globally, top holders are at least in the position to exert considerable control, either formally (e.g., voting in shareholder and board meetings) or via informal negotiations” (8)

Finally, the authors address the obvious question of the super-rich club: “From an empirical point of view, a bowtie structure with a very small and influential core is a new observation in the study of complex networks. We conjecture that it may be present in other types of networks where ‘rich-get-richer’ mechanisms are at work (although a degree preferential-attachment alone does not produce a bow-tie). However, the fact that the core is so densely connected could be seen as a generalization of the ‘rich-club phenomenon’”(8)  The overwhelming presence of European and American groups in this universe certainly influences the “club” culture, and geographically coincides with the core of the present financial crisis.

General conclusions to be drawn? In my analysis, it is indeed clear that this is a club of the very rich, and that they have earnings entirely disproportionate relatively to what they contribute to production. We are also facing institutions that manage huge resources, much greater than their capacity of management and rational destination. A wider effect is the tendency of a general domination of speculative systems on production systems. The companies effectively producing goods and services useful to society would have any interest in contributing to a more intelligent resource allocation system, as they are largely indirect victims of the process, as we all are. In this sense, the ETH study points to a structural deformation of the system that at some point will have to be confronted.

What about the issue people are most concerned with, the conspiracy? The major fact that stands out from the research is that no conspiracy is needed. By being articulated in a network, and with a very small number of people at the top, there is no problem that  can´t be resolved over golf on a weekend. This personal contacts network has always been of huge importance. But, above all, whenever the interests coincide, no conspiracy is necessary for these financial corporations to join efforts in the already mentioned battles to reduce taxes paid by the very rich, or to avoid taxation over financial transactions, or even to prevent the control of tax havens. The result is apparently this mixture of organized intervention for the protection of systemic interests, and chaotic activity on a huge scale, far beyond their management capacity. Too tight-nit to be regulated by markets, too powerful to be regulated by elected bodies, unable to manage the huge volumes of resources it controls, it’s a free-running wheel playing around with papers representing 14 times the value of annual world GDP.

The planetary financial chaos analysis finally can be traced to a tightly-nit group of actors. In the world panic generated by the crisis, policies of austerity, public debts, and the irresponsibility of governments are debated, leaving the main actor, the financial intermediation institutions, discreetly behind the scene. At the beginning of the financial crisis panic in 2008, the IMF publication “Finance & Development” presented a curious cover in bold letters: “Who’s in charge?”, implying that no one is. For good or for evil, the question is answered.

Link to the full ETH paper

Link to review in English in the New Scientist site


Below the list of top 50 corporations listed. Note that in the classification by sector (NACE code), the numbers beginning with 65, 66 and 67 correspond to financial institutions. Lehman Brothers has the right to a note apart from the authors.



[1] Ladislau Dowbor is a professor at PUC-SP in economics and business administration and a consultant to several United Nations agencies. Author of Economic Democracy and numerous studies available online on and Contact:

[3] S. Vitali, J.B Glattfelder and S. Battiston – The Network, of Global Corporate Control –  Chair of Systems Design, ETH Zurich – corresponding author – Full text available in arXiv (pre-publishing), and published by PloS One in October, 26th 2011  The wide international discussion generated from it, with answers from the research authors can be followed on

[5] Andy Haldane, The Money Forecast, New Scientist, 10 December 2012; having 14 times the global annual GDP in this “paper market” in this chaotic and unregulated system is downright scary. On the orgnization of the derivatives market, see the excellent overview from the International Energy Agency, The Mechanics of the Derivative Markets, , April 2011, and its clear definition of financial speculation: “Speculators use derivatives to seek profits by betting on the future direction of market prices of the underlying asset. Hedge funds, financial institutions, commodity trading advisors, commodity pool operators, associate brokers, introducing brokers, floor brokers and traders are all considered to be speculators” – IEA – The Mechanics of Derivatives Markets, p. 9

[6] The systemic risk increase in the large integrated systems is studied by Stiglitz in Risk and Global Economic Architecture, 2010,


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