4 Who Owns Big Carbon?^*Mapping the Network of Corporate Ownership

William K. Carroll and Jouke Huijzer

Advocates for continued expansion of fossil fuel production tend to represent the carbon-extractive sector as a “black box,” out of which flows what Matthew Huber (2013) aptly describes as the lifeblood for our consumer-capitalist ways. In addition to powering our cars and homes with the “buried sunshine” of carbon energy, the black box, these advocates claim, provides jobs and income for legions of workers. According to this narrative, all Canadians benefit from the production and consumption of fossil fuels. Yet the carbon-extractive sector is actually a complex of corporations, each owned by specific moneyed interests who claim the profits and are the central beneficiaries of sectoral activity. In this chapter, we look inside the black box to identify the investors who own substantial share blocs in Canada’s leading carbon-extractive companies and who have the most compelling stake in continuing to expand fossil fuel production. Aided by a network analysis of ownership relations, we offer several views of the powerful interests that dominate carbon-extractive activities in Canada.

In mapping who owns and controls Canada’s fossil-capital sector we identify which agents have both an interest in the sector’s continued growth and the economic power to shape the future of that sector. This in turn raises the question of how ownership of corporate shares confers economic power upon certain agents. As mentioned in this volume’s introduction, the parcelling of share ownership offering limited liability to investors is integral to corporate capitalism and to its structure of economic power. Each share is a title to part ownership in the company, entitling its owner to a portion of profit (as dividends) and a vote at the annual general meeting, at which the board of directors is elected and key policy proposals (including mergers and acquisitions and shareholder resolutions) are put to the vote. Who owns those shares is thus of great consequence. Although most corporations are not listed on stock exchanges—their shares are privately held either by persons, states, or other corporations—the shares of many of the largest corporations are publicly traded and thus distributed among multiple owners, including wealthy individuals, other corporations, small shareholders, and institutional investors. The last category, whose shareholdings have increased with the financialization of capitalism (Durand 2017), includes banks and life insurance companies, pension funds, asset managers, and hedge funds.

According to some scholars, the dispersal of corporate shares among many investors dilutes the power of capital owners, leaving salaried managers in charge. In their classic analysis of the “managerial revolution” in the largest US-based corporations, Adolf Berle and Gardiner Means (1932) discerned such a trend, portending a separation of owners of capital (mostly small investors) from actual controllers of capital, namely, professional managers. In the 1950s, Rolf Dahrendorf (1959) and other sociologists argued that this separation of corporate ownership and control had brought about a “decomposition of capital,” as the owners of capital no longer controlled corporate business. Yet scholars soon demonstrated that there was (and still is) reason to question the validity of these accounts (Scott 1997). For the vast majority of corporations in Canada and elsewhere, whose shares are not listed on stock exchanges, one owner or a few associated investors wield absolute strategic power over the corporation. But what of the largest corporations, most of which issue shares that are publicly listed on stock exchanges? In these cases, it is typical for the wealthiest of investors to amass strategic blocs of shares. By holding, say, 10 percent or more of a company’s shares an investor can (if the rest of the share capital is scattered among many small investors) control a corporation whose capital is many times greater than the value of the shares held. This further concentrates corporate power in the hands of people and corporations that assemble such blocs. Strategic control refers to the ability to control the composition of the board of directors based on ownership of such blocs.

In Canada, beginning with John Porter’s research based on data from 1960 (1965, 591–95), studies have consistently shown that most publicly traded corporations are controlled by individuals, families, and other corporations (Niosi 1978; Morck, Strangeland, and Yeung 2000; Carroll 2004). As William Burgess (2002, 249) noted, “the Canadian corporate network is characterized by the large degree of majority or strong minority control, and by the incorporation of many firms within larger corporate groups,” whether the controlling interest be a family or another corporation. In a study of corporate ownership and control in Canada conducted more than a decade ago, Yoser Gadhoum (2006, 180) reported that, among 1,120 Canadian-controlled corporations whose shares were publicly listed on stock exchanges at the time, 56.17 percent were ultimately controlled by wealthy families, while only 17.79 percent were without a clearly identifiable controlling interest.

Economic Concentration and Foreign Control

Economic concentration and the foreign control of Canadian corporations are key issues in understanding who owns Canada’s carbon-extractive sector. Overall, the Canadian economy is dominated by a relative few giant corporations, into which the lion’s share of capital has been concentrated. Economist Jordan Brennan (2012, 19, figure 5) found that in the half-century after 1960, the share of total net business profits in Canada claimed by the sixty largest firms listed on the Toronto Stock Exchange grew from 35 percent to an astonishing 60 percent. In 2000, slightly more than one million Canada-based firms reported under the Corporations Returns Act. Of these, just 1,434 (0.139 percent) were large enterprises (revenue greater than $75 million), yet they claimed 45.69 percent of all corporate operating revenue. By 2017, the total number of corporations had grown to 1.8 million, of which large enterprises, now numbering 2,979, constituted only 0.165 percent but garnered 48.86 percent of revenue.¹ Concentration in the oil and gas sector is especially pronounced, as we show below.

A related concern is whether ownership and control is lodged within Canada or in foreign domains (and if the latter, where). In Canadian studies, a pivotal issue has been the role of foreign-based centres of strategic control in structuring corporate power within Canada. Concern about high levels of foreign control in key sectors, including oil and gas, goes back to the 1956–57 Royal Commission on Canada’s Economic Prospects, and although levels have fallen since then, the issue retains salience. Kari Levitt (1970) identified high levels of foreign control as a threat to Canada’s economic sovereignty, the seeds of what she projected would be a bitter “harvest of lengthening dependency.” But a large body of research has pointed to the success of Canadian capitalists in maintaining their own positions and even expanding internationally (Niosi 1981; Carroll 1986; Klassen 2014; Kellogg 2015). In an era of capitalist globalization, each local capitalist class cedes some control of its home market but as quid pro quo is able to accumulate capital more effectively outside that market, in a multilateral cross-penetration of capital (Carroll and Klassen 2010). One indisputable fact in all this is the strong alignment of foreign ownership with economic concentration. As of 2017, 0.615 percent of all corporations based in Canada were foreign controlled (down from 0.751 percent in 2000), but these firms earned 27.54 percent of all corporate revenues (down from 29.72 percent in 2000). Foreign control is concentrated among the Canadian subsidiaries of giant transnational corporations, which themselves tend to be big companies. In 2017, among large enterprises (with revenues exceeding $75 million), foreign-controlled firms comprised 39.07 percent of companies and 41.52 percent of revenue.² Similarly, as of 2015, foreign-controlled firms operating specifically in oil and gas extraction and in supporting industries accounted for 39.5 percent of revenue and 44.3 percent of assets, with enterprises based in the United States (39.0 percent) and the European Union (24.3 percent) together owning a majority of all assets under foreign control.³

In this chapter, we focus on the investors that own substantial share blocs in the leading carbon-extractive companies in Canada. The analysis offers several views of the powerful interests that dominate carbon-extractive activities in Canada. This chapter has four objectives:

• to identify who owns the lion’s share of the carbon-extractive sector and to track trends in overall ownership over a recent five-year period
• to provide an overview of the mechanisms through which significant shareholders—corporate, personal, institutional—wield strategic control over individual corporations in the sector
• to map, more closely, the key ownership relations that tie the largest corporations in the sector into a national and transnational network of corporate power
• to take up the implications for our understanding of corporate power in Canada’s carbon-capital sector.

Who Owns the Largest Players in the Sector?

To identify the ownership interests that dominate in Canada’s carbon-extractive sector, we selected 103 carbon-extractive firms that numbered among the largest fifty in Canada at some point between 2010 and 2015 and identified their shareholders in each year. (For details on our methods, see the appendix at the end of this chapter.) Longitudinal analysis is of value here because Canada’s carbon sector has been in the throes of ongoing capital restructuring. After the financial crisis of 2008, oil prices were subject to tremendous fluctuations, reaching a peak in 2011 and then crashing to unexpected lows in 2014 before a partial recovery. As a consequence, companies saw much of their revenues vaporize, and some struggled to keep their businesses afloat.

We identified a total of 1,061 owners with substantial holdings in one or more of the companies within the window under examination, with the total number of identified owners in any given year varying from 459 in 2010 to 595 in 2015. To determine how large a share of total annual sectoral revenue each owning interest claimed in a given year, we first aggregated the annual revenues of all the carbon-extractive companies in our sample and calculated the percentage of total sectoral revenue that each carbon-extractive firm claimed. For each owner, we then multiplied the percentage of shares that the owner held in each carbon-extractive company by that firm’s percentage share of total sectoral revenue. Summing these values for each owner, we determined what percentage of the entire sector’s revenue each owning interest claimed.⁴ If, for example, a company is responsible for 4 percent of the sectoral revenue, and 5 percent of its shares are owned by one owner, such as Royal Bank of Canada (RBC), that stake gives the owner 0.2 percent (that is, 5 percent of 4 percent) of sectoral revenue overall. As can be seen in table 4.1, in 2015, RBC’s holdings in the companies in our sample gave it a 3.83 percent share in the total sectoral revenue that year.

Note: Owners are listed in descending order of their average rank over the entire period. Figures for “Share” and “Control” are percentages. “Share” refers to an owner’s share of the aggregate revenue of the companies in our sample in a particular year. Figures in the “Control” column (in the first section of the table) reflect an additional analysis conducted to take account of the fact that majority ownership confers effective control over a company, essentially giving an owner control of effectively 100 percent of the firm’s revenue. For details, see the chapter appendix.

It is worth noting that revenue in the sector is quite concentrated. The three largest companies (Enbridge, Suncor, and Imperial Oil) earn over 30 percent of the total revenue in the sample each year. About 60 percent of the total is claimed by top ten revenue earners, and the figure increases to over 80 percent when one considers the top twenty-five. In short, we find that, in terms of revenue, the market is already dominated by a handful of players. As table 4.1 indicates, ownership and control in the sector are also highly concentrated. Although approximately five hundred owners of share blocs can be identified in any given year, the top ten owners together account for over 25 percent of the sector’s total revenue. This share increases to over 40 percent for the top twenty-five owners and to 50 percent when the top fifty shareholders are considered. The numbers are even higher if we consider any majority shareholder to wholly “own” a company, given that shareholder’s uncontestable control over it.

Table 4.1 lists the shareholders who numbered among the top twenty-five in at least one year of the period under study. That the list of the largest individual owners includes only thirty-one such shareholders points to long-standing relationships between investors and companies, not quickly broken. Amid many thousands of investors, a small group has had a prominent and enduring presence, remaining largely unchallenged in the aftermath of the financial crisis and following the sudden drop in oil prices. The largest owners include foreign-based carbon transnationals (notably, Exxon Mobil, owner of both Imperial Oil and ExxonMobil Canada, and Royal Dutch Shell, owner of Shell Canada); Canadian banks (notably, RBC, the Toronto-Dominion Bank, and the Bank of Montreal); wealthy families such as the Montréal-based Desmaraises, who control the investment company Power Corporation of Canada; and asset managers such as Blackrock and Capital Group (both based in the United States).

In view of the high concentration of share ownership among a relatively small number of owners, figure 4.1 offers a graphical overview that focuses on the seventy-seven owners that have been in the “Top 50” largest owners in any year. Here we see the relative share of total revenue claimed by each type of investor. As a group, these leading investors account for approximately 70 percent of the revenue of the Top 50 in each year (the rest is divided among many thousands of small investors). The largest share is controlled through majority ownership by foreign corporations, closely followed by mainly US-based asset managers and investment funds. The third major type of shareholder is banks that, like most insurance companies and pension funds, are predominantly based in Canada. The “big five” Canadian banks are continuously present among the Top 50 investors, together accounting for over 10 percent ownership of the total sector.

The holdings of wealthy families account for another tranche of the sector’s capital, although in recent years their share has declined somewhat. Among those owning families are the Desmaraises, the Southern family (which by pyramidal shareholdings owns ATCO and Canadian Utilities through their holding company Sentgraf Enterprises), and Hong Kong’s richest man, Li Ka-shing (majority owner, through various holdings, of Husky Energy). In addition, foreign governments are represented via sovereign wealth funds, in the case of Norway and Japan, and via the China National Offshore Oil Corporation and the Korea National Oil Corporation, respectively owned by the Chinese and Korean governments. Together, foreign governments own about 3 percent of total revenue of sample firms, closely followed by the combined ownership of the Canadian federal and provincial governments (2 percent).

The difference between foreign and Canadian investment can be seen in more detail in Figure 4.2, which apportions the total revenue earned by the Top 50 investors by geographical locus of control. The overall picture is one of stability rather than change. Neither the eighteen takeovers in the period under study nor the aforementioned fluctuations in oil prices have significantly impacted the geographic distribution in ownership. Canadian investors still control the largest share of sectoral revenue: slightly under 30 percent. They are followed by US investors, with around 25 percent, and those in other countries in the Global North (which includes European countries, Australia, and New Zealand), with approximately 10 percent.⁵ Asian investment has decreased recently, from 3 percent to 2 percent. Investors from the Global South were and remain scarcely involved in Canada’s carbon-capital sector, although many of the foreign activities of Canadian firms are located in that area. The remaining shareholders of note are based in tax havens or could not be classified because their location or nationality was unknown.

Ownership and Control in the Top 200

In this section we dig beneath the overall trends revealed above, to provide a snapshot of the strategic control of the two hundred largest-revenue companies in Canada’s carbon-extractive sector (including extraction, processing, and transporting of oil, gas, bitumen, and coal) as of March 2017.⁶ If, as noted in the introduction, Berle and Means’s (1932) hypothesis of a growing separation of ownership and control does not exactly fit the case of Canada, they can still be credited with stimulating a long-standing research program into the modes by which corporations are controlled. They drew distinctions between several modes of control:

• companies under the absolute (or semi-absolute) control of a single owner
• those controlled by a major shareholder owning a majority of shares
• those controlled by a shareholder owning a minority of shares sufficiently large to enable strategic control
• those with no identifiable controlling owner (i.e., widely held companies).

Among our Top 200, the most common mode of control is minority control (10 percent to 49.9 percent), which pertains to 51.5 percent of companies. Slightly more than one-quarter of the sample (25.5 percent) has no owner with 10 percent or more shares. The remaining corporations are either wholly owned by a single owner (12 percent) or majority-owned by a single owner (11 percent).

Berle and Means viewed widely held corporations as controlled internally, by management, but the situation is actually more complex, especially in today’s financialized capitalism, when institutional investors own significant blocs of shares in many companies (Durand 2017). As John Scott (1997) has documented, a company lacking any one dominant shareholder may be controlled by a constellation of interests. Depending on circumstances, such constellations can include key creditors, senior management, and shareholders whose combined share ownership would be large enough to give them at least minority control (that is, greater than 10 percent of shares) but who lack the unity required to wield control in an active way. Admittedly, our use of share ownership as the criterion in designating a company as controlled in this way does not demonstrate whether or not a controlling constellation operates in a coherent and coordinated way. In fact, this mode of strategic control is virtually invisible, unless internal corporate management fails to deliver on profit or an external capitalist makes a hostile takeover bid. In the former case, the controlling constellation might initiate a change in top management; in the latter, the constellation might mobilize its combined share bloc against the unwanted suitor, to protect its collective investment (Scott 1997, 47–50; Carroll and Sapinski 2018).

In these scenarios, institutional investors often play key roles. Since the 1980s, as capitalism has become more financialized, major banks, life insurers, asset managers, and other institutional investors have taken ownership stakes in corporations, sometimes exceeding the 10 percent level that is typically seen as the threshold for strategic control. Yet, unlike corporations that amass share blocs with the intent of control and influence, these investors do not seek representation on the boards of the many companies in which they invest. Although institutional investors are in this sense passive, their investments represent votes of confidence in current management. Conversely, they hold “exit power”: divestment from a firm can register as a vote of nonconfidence in corporate management. Moreover, key owning interests sometimes exert influence through “one-on-one meetings between CEOs and institutional investors” (Carroll 2008, 59).

We thus distinguish, as types of controlling interests,

• wealthy individuals or families
• states or state bodies, including sovereign wealth and similar investment funds
• constellations of interests (with no one interest owning more than 10 percent)
• control by institutional investors (one of which owns more than 10 percent)
• control by another corporation.

These categories are key to determining the country in which control resides. For firms controlled by individuals or families, the country of control is the family’s country of principal residence, or domicile.⁷ Control by a constellation of interests typically involves a plethora of financial institutions and asset managers each holding stakes ranging from a threshold of 2 percent through to 9 percent. In these cases, we assume that strategic control is in Canada, unless the constellation is entirely based in another country (in which case control resides in that country). The last two types, (d) and (e), invite a further investigation of “ultimate control,” to determine which individual/family, state, or constellation of interests controls the ultimate parent firm in the chain of intercorporate ownership. For the fifty-two firms that we found to be controlled by another corporation, we traced the controlling interest in the parent firm up to the institution, individual/family, or state holding ultimate control—and noted the domicile of that owner. In the case of (d), control by institutional investors (such as financial institutions, asset managers, and pension funds), we noted the domicile of the investor holding the dominant stake, which was typically a bloc greater than 20 percent.

Overall, institutional investors are the most common ultimate controlling interest, accounting for 38.0 percent of the two hundred firms, followed by personal control (30.0 percent), control by a constellation of interests (28.5 percent), and control by a state (or, in one case, a cooperative based in India) (3.5 percent). While wealthy families and individuals have control over a substantial share of Canada’s carbon-extractive sector, most corporations are ultimately controlled by various constellations in which institutional investors figure prominently. Moreover, the mean 2016 revenue of the sixty firms ultimately controlled by persons (US$5.2 billion) is substantially less than the mean revenue of firms ultimately controlled by constellations of interests (US$8.6 billion) and institutional investors ($14.6 billion), though greater than the mean for the few state- (and co-op-) controlled companies (US$1.1 billion). As for the country in which ultimate control of these firms resides (see figure 4.3), we find that 65.0 percent are ultimately controlled in Canada, 18.0 percent in the United States, 10.5 percent in other jurisdictions of the Global North, 4.0 percent in China (including Hong Kong), and 2.5 percent in the Global South.

Compared with the ownership analysis in the previous section, US-based investors are less numerous. This is due to two factors: (1) since control by American transnational corporations is concentrated among the largest fossil fuel companies (hereafter, fossils), when we expand the sample to two hundred firms, and consider the number of firms rather than the amount of revenue flowing through them, the US-controlled segment shrinks; and (2) US-based asset managers own small but significant pieces of many Canadian fossils, but most of those investments are not large enough to confer strategic control. Fully 70 percent of the fossil firms controlled in Canada have constellations of interest or institutional investors as their ultimate controlling interests, with the rest controlled mostly by individuals and families. Institutional investors predominate as ultimate controllers of firms controlled in the Global North, including the United States. However, personal control is prominent among the small number of companies ultimately controlled in China and the rest of the Global South, as is state control in the case of China.

Given the prevalence of control by constellations of interest and institutional investors, a mapping of the ownership network can reveal who the key players are and how their stakes are configured. We take this up next.

Mapping the 2017 Top 50

In view of the pronounced concentration of capital in the very largest carbon-extractive firms, we now focus on the Top 50 within our core sample of two hundred.⁸ As of July 2017, the ORBIS database identified 1,679 ownership blocs into which the shares of the Top 50 have been concentrated, ranging in size from 0.01 percent of a company’s share capital (the Soros Fund’s stake in CNRL) to 100 percent (for example, Royal Dutch Shell’s stake in Shell Canada). However, 1,233 blocs amounted to less than 1 percent of the owned firm’s share capital, while 89 blocs comprised at least 5 percent of the owned firm’s share capital. Since our interest is in the major lines of ownership, we established 1 percent as a floor criterion and focused on the 446 shareholdings of at least 1 percent that link the Top 50 to a variety of major investors.

Not surprisingly, given the concentration of capital across the corporate economy, the 446 significant blocs were owned by a much smaller number of investors. As of summer 2017, they were directly held by 127 interests external to the Top 50—corporate, institutional, personal, and state.⁹ The combination of the Top 50 fossils and these 127 owners constitutes a network of 177 entities, with a total of 446 significant ownership ties, 89 of which involve stakes of 5 percent or more in a given carbon-extractive firm.

Most of the Top 50 and their owners—161 of the 177—form a single connected network of 161 nodes (corporations or persons), a “dominant component” in the parlance of network analysis. The other sixteen, consisting of seven of the Top 50 carbon-extractive firms and nine owners, are isolates from the dominant component of 161. Five of these seven are Canadian subsidiaries of non-Canadian companies and are represented only in dyads, each consisting of the subsidiary and its foreign-based parent.¹⁰ The other two Top 50 fossils that are detached from the main ownership network are partly owned by wealthy shareholders or by a combination of wealthy shareholders and financial companies.¹¹ But, aside from these seven outliers, the other forty-three Top 50 fossils are connected into an intricate network of corporate ownership.

The entire network is mapped in figure 4.4, with the small, isolated networks shown to the right of the dominant component. In this sociogram, fossil-capital firms and their owners appear as points, and ownership blocs appear as directed lines, leading from the owner to the owned. The colour of a symbol indicates the type of entity, while the shape indicates the domicile of ultimate ownership. Line thickness indicates the proportion of shares held by a given owner, as of the summer of 2017. Node size is proportionate to “weighted outdegree” (the sum of a given investor’s ownership stakes in the Top 50 firms), highlighting the owners that hold the most substantial stakes in the Top 50.

The network is a configuration produced by hundreds of weak ties—smaller institutional holdings, mostly owned by financial companies, including banks, asset managers, and life insurers—along with a few dozen large holdings that confer strategic control upon their corporate or personal owners. In the small networks (shown on the right) that are isolated from the dominant component and that exemplify bilateral relations of strategic control, we can see several transnational parents, including Royal Dutch Shell, owner of Shell Canada. What pulls the dominant component together as a connected network are many relatively small holdings, typically owned by institutional investors—the relatively large green circles and squares that form the core of the network. Among them, Canada’s top five banks (the circles) are prominent, along with five US-based asset managers (the squares, namely, Capital Group, Vanguard, Franklin Resources, FMR, and Blackrock). These ten major institutional investors have a total of 190 ownership stakes in thirty-six of the Top 50. Their weak ownership ties radiate from the network’s core, representing 43 percent of all ownership relations in the entire network. The Montréal-based Desmarais dynasty (represented in the network as the Desmarais Family Residuary Trust) straddles the institutional/personal divide as its majority-controlled investment company, Power Corporation of Canada, ultimately holds controlling interest in a range of Canadian (and European) corporations and also holds smaller stakes in many Canadian corporations across a range of sectors.

The network map shows that, as in the case of control by a constellation of interests, many of the top fossil-capital firms are partly owned by multiple institutional investors. However, this is not to say that personal ownership is unimportant. Through its private investment company, Sentgraf Enterprises, the Southern family controls two major fossil-based power producers: ATCO and Canadian Utilities. Billionaire Clayton Riddell, founder of Paramount Resources, is the major shareholder of that firm (and of several other carbon-capital firms). In summer 2017, Paramount bought controlling interest in Apache Canada from Houston-based Apache Corporation. Both the Southerns and the Riddells (including Clayton’s daughter Susan Riddell Rose, CEO of family-controlled Perpetual Energy) are ensconced within Calgary’s tightly knit carbon-capital elite, with Clayton (along with Murray Edwards) a part owner of the Calgary Flames.

In sum, the ownership network is constituted through the combination of a relative few highly concentrated share blocs (the thick lines in the sociogram, affording persons and corporations strategic control) and many relatively small blocs owned by financial companies (the thin lines). Individual investors and corporations tend to maintain a small number of strong ownership ties while financial companies maintain a great many weak ownership ties. Two financials (RBC and the US-based Vanguard Group) each hold stakes in a remarkable thirty of the Top 50 fossils, making them the most central investors in the ownership network. Although they have the same number of ownership stakes, RBC’s mean ownership blocs are nearly double the size of Vanguard’s.

At the other end of the ownership relation, the Top 50 fossils also vary greatly in how their share capital is distributed among significant owners. On average, each Top 50 fossil has 8.88 owners with stakes of at least 1 percent. Although twelve of the Top 50 have only one owning interest (and ten of these are majority-controlled by other corporations), most have multiple owners. Another dozen have fourteen or more (typically institutional) significant shareholders. This dozen includes eight of the largest Canadian-controlled firms: Encana (twenty-three significant shareholders), Cenovus (twenty-one), Suncor Energy (eighteen), Teck Resources (eighteen), TransCanada Corporation (seventeen), CNRL (sixteen), Pembina Pipeline (fifteen), and Enbridge (fourteen). Consistent with our earlier finding that institutional shareholders or constellations of interest predominate in the ownership of most Canadian-controlled fossil-capital firms, all but one of these Canadian-controlled majors are controlled by complex and overlapping constellations of interest involving the chartered banks and other financial institutions.¹²

Figure 4.5 isolates the significant ownership relations that converge upon these eight Canadian-controlled majors. Fifty-nine of the 127 external owners have stakes in one or more of the eight majors, and thirty-seven of them are financial companies. The ownership network is highly integrated by virtue of the overlapping investment portfolios of the big banks and other financial institutions. Four of the five major Canadian banks have significant stakes in all eight carbon majors.¹³ Canada’s most important financial institutions thus have a common interest in the continued growth of Canada’s carbon-extractive sector, but, it must be said, they also have a common interest in one another. Other research has shown that the banks are significant shareholders in one another, with RBC holding an average of 5.1 percent ownership of the other four while the Bank of Nova Scotia, the least invested, holds an average of 3.7 percent (Carroll and Sapinski 2018).

Finally, to isolate the central core of ownership interests, and in view of the variation in the size of ownership stakes in the network, we performed a stepwise reduction of the network, successively ratcheting up the criterion for an ownership stake from 1 percent to 10 percent (see table 4.2).

When the floor criterion for a significant ownership stake is raised to 2 percent, 41.7 percent of the ties and 23.2 percent of firms participating in the network disappear, leaving a network of 136 companies linked by 260 ownership ties. Clearly, many of the connections are well below the level at which strategic control or influence could be asserted. At a floor of 5 percent, the network is reduced to 99 firms linked by 89 ownership stakes, with 51 firms constituting a dominant component. At 10 percent or above, the network breaks into 22 components, each organized around particular strategic-control relations. Financial owners (including banks, insurers, and asset managers) are profusely involved at lower levels of ownership. They make up 63 percent of all owners whose stakes are between 1 percent and 3 percent. But among owners with stakes of 10 percent or more, the proportion of financial companies drops to 37 percent (eleven of thirty). Similarly, but less dramatically, although there are nineteen personal owners with stakes of 1 percent to 2.99 percent, only a dozen personal owners have stakes of 3 percent or more in any one of the Top 50. As is well known, several giant operating companies in the carbon-extractive sector own controlling interest in major Canadian firms. Eight have stakes of 10 percent or more in one of the Top 50.

Isolating the subset of firms linked together by ownership relations of 5 percent or more, we arrive at the map of the dominant component shown in figure 4.6. In this configuration, which includes twenty-eight of the Top 50 fossils, financial companies predominate, making up seventeen of twenty-three owners. Four of Canada’s five big banks participate, and US-based institutional investors—particularly Capital Group but also Franklin Resources, FMR, and Sailingstone—have significant stakes in multiple fossil firms. But RBC is by far the major stakeholder, owning 5 percent or more of twelve corporations. Earlier research revealed that RBC, which promotes itself as “Canada’s leading energy bank, for conventional, non-conventional and renewable resources,” matches many of its ownership stakes in fossil fuel companies with interlocks between its board/senior management and those of the firms it partly owns (Daub and Carroll 2016).

Of course, shareholdings are not the only, or even the most weighty, capital relations between high finance and big carbon. Canadian banks are major lenders to the fossil sector. Because detailed data on these relations are not systematically available, however, our mapping is restricted to ownership stakes. Yet, as an illustration of the scale of the loans that are integral to the symbiosis of the two sectors, consider that, since 2017, the troubled Kinder Morgan Trans Mountain Pipeline expansion project has had a $5.5 billion loan facility agreement with the five big Canadian banks, with RBC as administrative agent (Allan 2018). Without such financial enablement (complemented by government largesse, as in the May 2018 federal purchase of Kinder Morgan’s Trans Mountain Pipeline assets), megaprojects such as the proposed bitumen pipeline could not be mounted.

Conclusion

Our mapping of ownership and control in Canada’s carbon-extractive sector reveals the major interests with stakes in business-as-usual. We find a confluence of Canadian capitalist ownership, via families and financial institutions, and foreign ownership, via transnational corporations and asset managers. These ownership relations are arrayed in a network of many weak ties (smaller institutional holdings) and a few dozen large holdings that confer strategic control upon their corporate or personal owners. As concentrated as the sector is, so are its owners concentrated: a small group of actors has control over much of the sector. The concentration of fossil capital and of its ownership/control represents a massive centralization of economic power in the hands of private investors accountable only to themselves. Although foreign-based capital figures in the ownership of many corporations, through asset managers and in some cases transnational parent corporations, Canadian capitalists, including bankers, own and control a substantial (and increasing) share of the sector. Yet, far from representing the national interest of Canadians, these proprietors simply pursue their own particular interests in maximizing immediate profits from carbon extraction and processing.

Personal control of fossil capital remains substantial, particularly among mid-sized fossils. Some of the world’s largest transnational corporations continue to control several of the largest Canadian fossils. But what stands out are the many comparatively small yet significant holdings of institutional investors (some of them major US-based asset managers), which form constellations of interests, in partnership with top-level management. This pattern is consistent with two sets of related findings. In chapter 5 of this volume, a mapping of the elite network of interlocking directorates around the largest Canada-based fossil firms reveals a well-integrated, east-west configuration of financial institutions (based mainly in Toronto) and fossil corporations (based mainly in Calgary). An earlier mapping of the global corporate ownership network, circa 2007, showed that “the socialization of capital within the capitalist class, mediated by institutional investors and expressed through intercorporate ownership of proportionately small, fluidly held blocs of shares, is now a global phenomenon” (Carroll 2012, 71). Within this form of capitalist socialization, massive financial institutions participate in overlapping constellations of interest, creating a close symbiosis between fossil capital and financial capital. Their many stakes in various firms, sometimes accompanied by board interlocks, give them an obvious interest in the vitality of the entire sector and in obstructing movement to wind down fossil capital and to build up renewables.

In the immediate situation, our findings support a strategy of pressing fossil capital’s financial enablers to divest. Divestment does not pre-empt other policy- or movement-based initiatives to reduce or undo the highly concentrated ownership of Canada’s carbon sector, and it is not a panacea, as noted in chapter 17. Divestment does not challenge corporate power as it operates across the economy, nor does divestment in itself suggest what will replace fossil fuels or, equally important, how the social relations of a post-carbon economy can be organized democratically rather than oligarchically. What makes divestment (and complementary policies to sunset fossil capital) appealing is its clear focus: “to destroy the most ecological[ly] harmful sector of capitalism, that is, fossil capital” (Holgersen and Warlenius 2016, 523). Although fossil fuel divestment has registered victories elsewhere, Canada’s major financial institutions are, as we have seen, so deeply invested in fossil capital that divestment must push especially hard against an entrenched “new denialism” that acknowledges the verdict of climate science yet refuses to take meaningful action (Klein and Daub 2016).¹⁴ Still, even unsuccessful divestment campaigns can have a salutary impact in raising consciousness about the actualities of economic power in fossil capitalism (see chapter 17). Moreover, divestment may gain political traction as fossil majors like Suncor acknowledge that some reserves are best left in the ground (Linnitt 2016), while research highlights emerging risks to fossil fuel investors, as in climate-damage liabilities and stranded assets (Leaton and Grant 2017; Shue 2017).

In the longer term, however, our findings underscore the need to democratize control of energy as we shift from carbon to renewables. Our fossilized system of oligarchic ownership of an ecological time-bomb needs more than fine tuning.

Appendix: Methodological Notes

To conduct a longitudinal tracking of sectoral ownership, we could not simply take a set of companies dominant at one point and trace their owners over time, as we would miss companies that were prominent years ago but went bankrupt, were taken over, or did not grow quickly enough to remain in the Top 50. Instead, we constructed a sample consisting of all companies that, during the period under study, appeared at least once among the top fifty companies listed in Oilweek’s annual “Top 100.” This yielded an initial sample of 101 companies. We then found that this initial sample included several subsidiaries that were wholly owned by other companies also on the list, as well as a few energy and utility companies not directly involved in carbon-extractive production. At the same time, it excluded several subsidiaries of foreign-based firms. We therefore excluded a total of eight companies but added ten of the largest foreign-owned subsidiaries based in Canada (such as Shell Canada, Total E&P Canada, and Chevron Canada). In total, the sample thus comprised 103 companies. Of these, eighteen were taken over by another company during the period under study. In such cases, we excluded these companies from the analysis in years subsequent to their takeover only if the new owner was already in the sample.

We gathered data on total revenue from the annual reports of these companies and used the ORBIS Bureau van Dijk database to identify their shareholders. The ORBIS database lists only shareholdings of size. Rarely does it include share blocs comprising less than one-tenth of 1 percent of outstanding shares, even though some of these blocs are valued in millions of dollars.¹⁵ As a result, small shareholdings are not represented in our analysis. Our estimates of the ownership shares held by major owners are also rather conservative, but for a different reason. For firms majority-controlled by an identified owner, ORBIS often reports share ownership simply as majority-owned, without indicating the percentage of shares owned. We initially coded these cases as ownership of 50.01 percent, yet actual ownership may range up to 100 percent, and, as noted earlier, majority ownership effectively confers control. In that light, we did an additional analysis of control, taking each majority holding as equivalent to 100 percent ownership while removing all other holdings from the analysis. The results are presented in the “Control” columns in table 4.1.

An additional methodological complication stemmed from the secrecy of financial information pertaining to some wholly owned subsidiaries of foreign-based corporations. For six such firms, we imputed total revenue by benchmarking on the basis of their total production in Canada, using the barrels of oil equivalent (BOE) metric to do so. We estimated the revenue per BOE and used this to estimate the revenue for the companies on which we did not have revenue data. If, as was the case for some of these firms, information about annual production output was also missing, we assumed an annual revenue growth for the firm equal to the average annual growth in the sample.