By: Warren Sikolo

     I. Introduction – The Puzzle of Modern Corporate Control

            Picture a board of directors sweating over a conflicted merger. In front of them, fairness opinions, diligence reports, the works. But the real question in the room … how will the institutions (think of BlackRock, Vanguard, and State Street) vote? In 2026, these three firms (the “Big Three”) together cast about 25% of S&P 500 votes and may approach 40% in the next two decades.^[1] However, despite this, Delaware law does not treat institutional investors as controllers. How come?

Delaware’s paths to controller status describe familiar actors in corporate governance—founders, dominant family shareholders, or private equity sponsors who hold enough equity and sway to shape boards without breaking much sweat. Institutional investors, including the Big Three fund managers, do not quite fit this model.^[2] Such investors are built to spread their wealth across the entire market, leaving them with significant but non-controlling stakes across hundreds of companies.^[3] However, despite lacking traditional hallmarks of control, their coordinated voting power increasingly plays a decisive role in the outcomes of corporate decisions, proving that sometimes, influence comes not from running the company, but from showing up with the biggest stack of proxy cards.^[4]

Modern ownership looks nothing like the old days. Large asset managers hold diversified stakes across hundreds—sometimes thousands—of companies, often including competing firms in the same markets.^[5] Their voting decisions are not made by scattered fund managers doing their own thing, but by centralized stewardship teams that craft portfolio-wide governance policies and apply them uniformly across every company they touch.^[6] And while boards may not be concerned about these institutions barging in to run the business, they pay a lot of attention to how these shareholders might vote.^[7] The mere possibility that a major asset manager will vote against management during an election or a proxy contest is enough to give these investors substantial influence over corporate outcomes.^[8]

            All of this leads to a puzzle. If a handful of institutional investors can effectively determine the outcome of shareholder votes, why does Delaware law not treat them like controllers—or at least scrutinize more closely whether they are truly disinterested? This blog maps that tension: how Delaware defines control, how institutions actually vote, and whether they are hidden controllers, gatekeepers, or something else.

  II. How Delaware Thinks About “Control”

            Delaware corporate law defines a “controlling stockholder” through several specific pathways. The most straightforward is majority ownership. A stockholder who owns or controls a majority of the corporation’s voting power is considered a controller because that stockholder can determine the outcome of director elections and, in practical terms, make the corporate machinery dance to their tune.^[9]

Control may also arise if a stockholder possesses governance rights that effectively determine board composition.^[10] Under the statute, a person is a controller if they have the right, by contract or otherwise, to elect a majority of the board, or hold a majority of the board’s voting power.^[11] In such circumstances, formal ownership levels matter less than a stockholder’s structural ability to essentially determine who runs the corporation.

Delaware law further recognizes that a minority stockholder can qualify as a controller when it holds at least one-third of the corporation’s voting power and exercises managerial authority over the business and affairs of the corporation, making it functionally comparable to a majority stockholder.^[12]

Finally, Delaware recognizes the possibility of a control group. Two or more stockholders who are not individually controlling stockholders may nevertheless be treated as one if, through an agreement, arrangement, or understanding, they act together to function as a controlling stockholder.^[13] Mere parallel voting behavior or shared economic incentives are not enough; the doctrine requires evidence of coordinated action among the investors.^[14]

            The controller label is no decorative flair—it sometimes is a one-way ticket to the Court of Chancery’s hot seat. Any conflicted transaction involving a controller automatically invites the unforgiving glare of entire fairness review, unless the deal is properly cleansed through established statutory safeguards.^[15] However, this whole framework operates on the assumption that controllers are obvious and that the shareholder base can be neatly divided into “interested” and “disinterested” camps. But where does it leave today’s institutional investors who rarely hit 50%, have no formal alliances, yet manage to regularly swing shareholder votes?

 III. When the Same Investors Own Everyone

            Delaware’s control doctrine is ideal for when block holders are obvious and easily identifiable.^[16] Today’s cap tables tell a different story: institutional investors––especially large asset managers—now hold the bulk of U.S. equity market and regularly show up among the largest stockholders in public companies.^[17] And within that group, an even smaller set of diversified complexes keep landing at the top of stockholder lists, with the Big Three already casting roughly a quarter of S&P 500 votes and projected to approach 40% over time.^[18] The result is “common ownership:” the same institutions simultaneously owning many pieces of competing firms and voting those shares according to portfolio‑wide policies, a pattern well-documented in the common ownership literature and now baked into modern corporate governance.^[19]

            Yet Delaware’s statutory and common‑law tests for “control” are still wired to old-school levers—majority voting power, contractual rights to appoint a board majority, or substantial minority stakes paired with managerial authority.[20] These are great tools for spotting concentrated owners, but they are not built to capture the softer, more diffuse influence of modern institutional investors.^[21] Despite lacking any of those formal hallmarks, institutions with 20 to 30% of the votes and a habit of moving in coordinated patterns can effectively decide majority thresholds, especially with low retail turnout.^[22] On paper, there is no controller here: no majority bloc, no veto rights, no CEOs appointed. In the voting booth? They tip the scale.

 IV. Can Institutional Votes Really Cleanse Conflicts?

            Delaware loves a clean stockholder vote. Under Corwin, when a transaction does not involve a controlling stockholder and receives approval from a fully informed, uncoerced majority of disinterested stockholders, courts apply business judgment review.^[23] Under amended § 144(b) of the Delaware General Corporate Law, a conflicted transaction is cleansed once an informed, uncoerced majority of disinterested stockholders signs off.^[24] The statute’s bet is straightforward: if the minority gets a say, the market’s disinterested electorate can police bad deals better than courts. But in large cap companies, that electorate is overwhelmingly comprised‑ of institutions, not dispersed individuals.^[25] The Big Three alone cast about 25% of S&P 500 votes and often provide the very margin needed for cleansing.^[26] Which raises the uncomfortable question: if these investors dominate the vote and operate through portfolio‑wide policies, are they truly disinterested?

            Research shows that large asset managers often sit on both sides of a deal, or hold stakes in competing firms, which, naturally, creates incentives very different from that of a single-firm owner.^[27] Critiques have long flagged that mutual-fund votes can be shaped by cross-ownership conflicts, corporate-client dynamics (where fund families may wish to curry favor with issuers), or the gravitational pull from uniform, one-size-fits-all voting policies. ^[28] Any of these pressures can nudge votes away from what underlying investors might actually prefer.^[29] That concern maps neatly onto how Delaware’s cleansing doctrines actually operate: courts rely on an informed, uncoerced vote by “disinterested stockholders,”[30] but the real-world electorate is dominated by institutional stewards applying portfolio-wide policies.^[31] So when the statute says “cleansed by disinterested stockholders,”[32] what it often means is “cleansed by institutional investors.”[33] Institutional comfort is often the determinant of whether a conflicted transaction gets cleansed, especially in the large-cap universe.^[34] But if those same institutions own both sides of the merger and vote via portfolio-wide policies, are they really the neutral minority watchdogs the cleansing doctrine imagines?

   V. Hidden Controllers, Gatekeepers, or Something Else?

            To pull the threads together, there are three ways to think about how institutional investors fit into Delaware’s control landscape:

a.     Frame 1: Hidden Controllers

            Given that institutional investors now command a huge share of the corporate vote, boards increasingly craft deals with an eye toward how these investors are likely to vote, knowing their support is often practically indispensable for approval.[35] This dynamic looks a lot like functional control: the ability to shape outcomes without majority stakes, contractual rights, or board level authority, but simply through voting. However, because these investors’ governance decisions are coordinated across funds and filtered through centralized, portfolio-wide voting policies, imposing firm-specific controller duties would directly collide with their broader incentives and likely create doctrinal and operational chaos.[36]

b.    Frame 2: Gatekeepers

It is also possible to think of institutional investors not as controllers, but as transactional gatekeepers: they do not manage the day-to-day operations, but stand at the checkpoints of major corporate moments—M&A votes, proxy contests, director elections—acting through centralized stewardship teams and uniform voting policies.[37] Their influence arises not from managerial authority but from their centralized stewardship teams, and from uniform voting policies that standardize how their vast portfolios respond to recurring governance issues. ^[38] Through these mechanisms, institutional investors operate less like traditional block holders and more like regulatory nodes in the corporate ecosystem.

c.     Frame 3: The in-between Approach

A middle position avoids labeling diversified institutions as controllers altogether, while still recognizing that their votes can raise context-specific concerns—especially in deals where they hold positions on both sides. This approach suggests tightening the analysis of “disinterested stockholders” for cleansing purposes, rather than rewriting Delaware’s control framework.^[39]

 VI.         Conclusion – No Perfect Frame Exists.

Delaware’s classic picture of a controller—a founder with a commanding equity stake or a stockholder with firm boardroom influence—keeps fading into the rearview mirror. In its place stand institutional investors who, label or not, increasingly shape governance outcomes, as they wield voting blocs big enough to decide elections and transactions across the market. They may not look like the controllers of the old, but their influence is hard to miss. At some point, the law will catch up to this.

About the Author

Warren Sikolo is a third-year evening division law student at Widener University Delaware Law School. He serves as a Staff Editor for Volume 51 of the Delaware Journal of Corporate Law and is the incoming Editor-in-Chief for Volume 52. Warren graduated from Widener University in 2021, earning his bachelor’s degree in Legal Studies. While in law school, Warren was a summer law clerk at Klehr Harrison Harvey & Branzburg LLP in Philadelphia, Pennsylvania, and is currently a real estate paralegal at Ward & Taylor, LLC in Wilmington, Delaware. In the summer of 2026, he will be a summer associate at Royer Cooper Cohen Braunfeld LLC, and will serve as a Josiah Oliver Wolcott Fellow to Justice N. Christopher Griffiths of the Delaware Supreme Court for the 2026–2027 term. After graduating from law school, Warren plans to pursue a career in Pennsylvania, Delaware, or Washington D.C.

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[1] See Lucian Bebchuk & Scott Hirst, The Specter of the Giant Three, 99 B.U. L. Rev. 721, 724 (2019).

[2] See John C. Coates, IV, The Future of Corporate Governance Part I: The Problem of Twelve 14–15 (Harv. Pub. L. Working Paper No. 19-07, 2018), https://papers.ssrn.com/abstract=3247337.

[3] See Bebchuk & Hirst, supra note 1, at 727.

[4] See Coates, IV., supra note 2, at 14.

[5] See José Azar, Martin C. Schmalz & Isabel Tecu, Anticompetitive Effects of Common Ownership, 73 J. Fin. 1513, 1513–16 (2018).

[6] See Coates, IV., supra note 2, at 15.

[7] See Azar, Schmalz & Tecu, supra note 5, at 1553–57.

[8] See id. at 1557.

[9] See Del. Code Ann. tit. 8, § 144(e)(2)(a).

[10] See id. § 144(e)(2)(b).

[11] See id.

[12] See id. § 144(e)(2)(c).

[13] See tit. 8 § 144(e)(3).

[14] See id.

[15] See Andrew J. Noreuil et al., Delaware Law Alert: A Step-by-Step Approach for Boards Evaluating Conflicted Director, Officer, and Controlling Stockholder Transactions Under the Amended Delaware Corporation Law, Mayer Brown (Apr. 14, 2025), https://www.mayerbrown.com/en/insights/publications/2025/04/delaware-law-alert-a-step-by-step-approach-for-boards-evaluating-conflicted-director-officer-and-controlling-stockholder-transactions-under-the-amended-delaware-corporation-law.

[16] See Controller Confusion: Realigning Controlling Stockholders and Controlled Boards, 133 Harv. L. Rev. 1706, 1707 (2020) [hereinafter Controller Confusion].

[17] See Adriana De La Cruz, Caio de Oliveira & Hitesh Tank, Institutional Investor Engagement and Stewardship, Harv. L. Sch. F. on Corp. Governance (Jan. 7, 2026), https://corpgov.law.harvard.edu/2026/01/07/institutional-investor-engagement-and-stewardship/.

[18] See Bebchuk & Hirst, supra note 1, at 741.

[19] See Azar, Schmalz & Tecu , supra note 5, at 1514, 1525, 1554; see Martin C. Schmalz, Common-Ownership Concentration and Corporate Conduct, 10 Ann. Rev. of Fin. Econ. 413, 418 (2018).

[20] See Del. Code Ann. tit. 8, § 144(e).

[21] See Controller Confusion, supra note 16, at 1707.

[22] See Azar, Schmalz & Tecu, supra note 5, at 1553–57.

[23] See Corwin v. KKR Fin. Holdings LLC, 125 A.3d 304, 312 (Del. 2015).

[24] See tit. 8, § 144(b).

[25] See Caleb Griffin, Margins: Estimating the Influence of the Big Three on Shareholder Proposals, Oxford Bus. L. Blog (July 7, 2020), https://blogs.law.ox.ac.uk/business-law-blog/blog/2020/07/margins-estimating-influence-big-three-shareholder-proposals.

[26] See id.

[27] See Azar, Schmalz & Tecu, supra note 5, at 1521, 1552–59 (documenting that large institutional investors simultaneously hold substantial stakes in multiple competing U.S. airlines; finding that this common ownership creates incentives to maximize portfolio value rather than individual firm profits—because gains for one portfolio firm come at the expense of another—which leads to softer competition and anticompetitive outcomes “more than 10 times larger” than traditional merger guidelines; and empirically demonstrating that such ownership structures correlate with 3–12% higher ticket prices, as diversified shareholders like the Big Three have little incentive to push for aggressive competition across their portfolio holdings.).

[28] See Sean J. Griffith & Dorothy S. Lund, Conflicted Mutual Fund Voting in Corporate Law, 99 B.U. L. Rev. 1151, 1151 (2019).

[29] See id.

[30] See Henry T. C. Hu & Lawrence A. Hamermesh, Reconceptualizing Stockholder “Disinterestedness”: Transformative Institutional Investor Changes and Motivational Misalignments in Voting, 80 Bus. Law. 311, 311 (2025).

[31] See Schmalz, supra note 19, at 417–18, 433–37.

[32] See Del. Code Ann. tit. 8, § 144(b).

[33] See Griffith & Lund, supra note 28, at 1151–55. Under amended § 144 of the Delaware General Corporate Law, conflicted transactions can be cleansed by an informed, uncoerced vote of a majority of disinterested stockholders. In large‑cap companies, those disinterested stockholders are overwhelmingly institutional investors, with the Big Three alone casting roughly one‑quarter of the votes—which is often a big enough margin to determine many outcomes.

[34] See tit. 8, § 144(b).

[35] See Azar, Schmalz & Tecu, supra note 5, at 1557.

[36] See Lucian Bebchuk & Scott Hirst, Index Funds and The Future of Corporate Governance: Theory, Evidence, and Policy, 119 Colum. L. Rev. 2029, 2050–76 (2019).

[37] See Bebchuk & Hirst, supra note 1, at 724.

[38] See Coates, IV., supra note 2, at 15.

[39] See Griffith & Lund, supra note 29, at 1158.