The Contribution of Shareholder Primacy to the Racial Wealth Gap

Abstract

The US racial wealth gap is substantial and growing, stemming from a history of structural racism and the intergenerational transmission of wealth. This article investigates the role of corporate equity and mutual fund ownership on the racial wealth gap over time. 92.1 percent of US corporate equity and mutual fund value is owned by white households; Black households own 1.5 percent while Hispanic households own 1.9 percent. I use the Federal Reserve's Distributional Financial Accounts to determine the changing impact of the corporate equity gap on the racial wealth gap, and to measure how shareholder payments—dividends and stock buybacks—are divided by race and ethnicity. I find that total shareholder payments made to white households during that time frame totaled $13 trillion, while $181 billion went to Black households and $212 billion to Hispanic households. I then find that the proportion of the gap in corporate equity and mutual fund ownership to the overall racial wealth gap has grown over the past three decades, from 10 percent to 23 percent. This analysis contributes to policy discussions about ending shareholder primacy and wealth inequities that are a legacy of the US's history of slavery, racism, and xenophobia.