My Finance. My long-term goal is to work my

   My name is Olga Tertychenko. Me and my family are living in Cape Coral, FL.  Cape Coral located in southwest Florida, known for its many canals. I’m working at Cape Coral Hospital as a Clinical Lead Monitor Technician (telemetry ekg technician). My short-term goals after graduating MBA program is to apply for finance related jobs at the hospital, in order to build up the skills and experience needed to transition from what I’m doing now to financial world, before moving up, because for me it will be a career change from Bachelor Degree in Social Work to Finance. My long-term goal is to work my way up to become a Chief Financial Officer. II.   In the past, private individuals and large institutions have largely invested in actively managed mutual funds, such as Fidelity, in which fund managers choose stocks with one goal – to surpass the market. But after the financial crisis of 2008, investors switched to index funds, which reproduce stock indices, such as the S & P 500. The scale of the changes is striking: from 2007 to 2016. in actively managed funds an outflow of about $ 1.2 trillion was recorded, while index funds received more than $ 1.4 trillion. In the first quarter of 2017, index funds raised more than $ 200 billion – and this is the highest quarterly growth. Democratization of the market.Tthis shift, perhaps the largest in the modern history of investments, is due to a much lower cost of index funds. Actively managed funds analyze the market, and their managers are well payed for their work. But the vast majority are not able to consistently outplay the index. So why pay from 1-2% per year for active funds, when the index funds cost a tenth of this and provide the same yield? Some observers welcomed this development as “democratization of investment”, as it significantly reduced investor costs. But other impacts of this seismic shift are far from democratization. One of the significant differences between the active fund and the index is that the first is fragmented, it consists of hundreds of different asset managers, both small and large. On the other hand, the sector of fast-growing index funds is highly concentrated. It is dominated by only three giant US asset managers: BlackRock, Vanguard and State Street – what we call the “Big Three”. The decline in fees to increase the index funds led to a massive concentration of corporate property. BlackRock, Vanguard and State Street own assets under the management of almost $ 11 trillion. This is more than all state funds together, and more than three times the assets of hedge funds. Moreover, the Big Three became the largest shareholder in 40% of all publicly registered companies in the United States. In 2015, these 1600 American companies combined revenues of about $ 9.1 trillion, their market capitalization was more than $ 17 trillion, and they gave jobs to more than 23.5 million people. According to the S & P 500 – the benchmark index of the largest corporations in America – the situation is even more extreme. Together, the Big Three is the largest shareholder in almost 90% of the index companies, including Apple, Microsoft, ExxonMobil, General Electric and Coca-Cola. This is the index in which most people invest. The power of passive investors. With corporate property comes the power of the shareholder. Recently, BlackRock claimed that it had not legally been the “owner” of the shares on its balance sheet, but rather acts as a kind of custodian for its investors. This is common practice for lawyers. What can not be denied is that the “Big Three” still uses the right to vote with these shares. Therefore, they should be perceived by the owners of de facto corporate leaders. These companies have publicly stated that they are seeking to exert influence. William McNabb, chairman and chief executive officer of Vanguard, said in 2015 that “in the past, some mistakenly believed that our predominantly passive management style implies a passive attitude toward corporate governance, but that’s very far from the truth.” And if you analyze the vote of the Big Three, it turns out that it is coordinated through centralized departments of corporate governance. This requires considerable effort, because technically the shares belong to a variety of different individual funds. Consequently, only three companies have enormous potential power over corporate America. It is interesting that the Big Three votes for proposals of current management in about 90% of cases at annual meetings, while in most cases it also votes against proposals that are beneficial to other shareholders, for example, regarding appeals to the independent chairman of the board of directors. One interpretation is that BlackRock, Vanguard and State Street are reluctant to exercise their power over corporate America. Others are wondering whether the “Big Three” really wants to have this power of management, as these companies primarily seek to minimize costs. Corporate American monopoly. What are the future consequences of the unprecedented common position of the “Big Three”? Research is still in its infancy, but some economists already argue that such a concentration of shareholder power can have negative consequences for competition. Over the past decade, in many industries in the US, only a small group of companies dominated – from aviation to banks. “Big Three” is almost always the largest shareholder in the few competitors that remain in these sectors. This applies to US airlines Delta and United Continental, banks JPMorgan Chase, Wells Fargo, Bank of America and Citigroup. All these corporations are included in the S & P 500 index, the index in which most people invest. Their leaders are probably well aware that the “Big Three” is the dominant shareholder in their firm, and will take this into account when making decisions. Therefore, perhaps, airlines have less incentive to lower prices, because this will reduce the total revenue for the “Big Three”, their common owner. Thus, the “Big Three” can exhibit a kind of “structural strength” in relation to most of corporate America. Regardless of whether they aspired to this or not, the “Big Three” has accumulated the exclusive power of shareholders, and they continue to strengthen it. Index funds are a business of a huge scale, which means that at this stage it will be very difficult for competitors to gain market share. In many respects, the boom of the index fund turns BlackRock, Vanguard and State Street into something similar to inexpensive utilities with a quasi-monopoly position.The biggest success of Sarbanes-Oxley is that companies take financial reporting and accounting more seriously than they used to, and that shows up in fewer errors, fewer restatements, in more investment. The confidence in financial reporting is up, restatements are down. It’s also helped in the corporate governance side by clarifying that the Audit Committee should be making certain decisions and taking responsibility for certain thing rather than management. The downside it cost more than it was expected.