Corporations throughout the world have become increasingly dependent on open market equity to finance their expansions, according to a report issued today by The Conference Board.

As U.S. institutional investments continue to tower over all others, the new report shows that governance activism is spreading worldwide.

U.S. institutional investments dominate those of all other countries, giving the type of corporate governance activism common in the United States great potential influence over global investments.

International equity holdings by the largest U.S. pension funds continue to show that a small group of activist investors among them can exert considerable leverage over corporations in these countries.

The largest 25 U.S. pension fund holders of international equity, ranked by their foreign equity holdings, accounted for roughly 16% of the $1.85 trillion foreign equity held by all U.S. investors in the third quarter of 2000.

“This phenomenon is shifting the economic clout to investors with equity stakes,” says Carolyn Kay Brancato, director of The Conference Board’s Global Corporate Governance Research Center and co-author of the report. “Especially powerful are those willing to become activists. These institutional investors are evaluating these companies’ performance according to an ever-changing set of global governance standards.”

Outside of the United States, there is significant pressure to bring disclosure of information to the investing public up to U.S. standards. This is opening up the traditionally close relationships between companies and institutional investors.

For many institutional investors, the attitude of the management of a company toward corporate governance is a crucial factor. Investors want companies to establish adequate auditing systems, The Conference Board study notes.

“A striking development is the extent of communications among institutions around the world,” concludes Brancato. “Institutional investors abroad are able to give support to local investors and learn from them about the key issues in their particular markets. When possible, they also try to forge alliances with local investors to share knowledge and expertise, creating a world of global investors.”