Archive for September, 2011

I refuse to believe corporations are people — until Texas executes one

September 24th, 2011 1 comment
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More by Bob Monks on the shareholder marginalization at the core of the crisis of public corporation capitalism

September 22nd, 2011 No comments

From a September 20 blog post at by James McRitchie (emphasis added):

Recently, ICGN held their annual conference in Paris. …

Another truthsayer at the conference was Robert A.G. Monks, whose L’Appel can be read as quickly as fast food but provides nutritional value of a much higher order. Bob lays out a number of observations. I’ll just list a few:

  • Our governance systems are chartered and enforced (if at all) nationally, but an increasing percentage of total assets are held “off shore.” Owners, rather than governments or other entities, appear to be the only viable candidates to enforce corporate governance standards.
  • Our framework is based on the assumption that shareowners engage and hold management’s accountable for their performance… but the majority of shareowners are passive because of conflicts of interest, cost and collective action problems.
  • This leaves public, union and SRI funds as the only ones left on the field, depriving the market of mainstream experience and insights and it allows shareowner activism to be trivialized and dismissed as representing only special interests.
  • Wall Street captured a generation of bright professionals that might have gone to more productive employment and investment banking moved from the periphery to the largest industry in land. Money and power; plain and simple greed.
  • Corporations insist that government meet their demands, even if they run counter to the interest of citizens… they exercise unusual veto powers.
  • The average investor thinks of “business” as an impersonal entity owned by the very rich and managed by over-paid executives. “But the hundreds of millions of shareholders – most of whom are of modest means – are the real owners, the real entrepreneurs, the real capitalists under our system. They provide the capital…”
  • The same corporations act as investment banker and financier to companies whose shares it holds in its fiduciary portfolio. “The fundamental law of trusts is unenforced and is treated as merely a verbal inconvenience.”
  • Those in power “prefer the present ownerless situation where corporate executive power is accountable to government which it easily dominates.”

Monks contends what may be at risk is the survival of democratic capitalism and the sustainability of the traditional real return on equity investments of 6% plus or minus per annum in excess of inflation. He calls for mobilizing the voting power of institutional shareowners through:

  1. an educational program and
  2. a political action program

Of course, talking at ICGN, he hopes members will take on these tasks in a more meaningful way. The US Chamber of Commerce intervenes in scores of court cases, such as the SEC’s proxy access rules. Maybe ICGNcould do the same.

There can be no effective corporate governance, until, unless and to the extent that the major institutions become involved. This will not happen until and unless there is a formal legal policy that shareholder activism in the public interest and is the national policy.

Government policy would help, but as Monks also points out, corporate executives exercise unusual veto powers over governments and can “off shore” assets, jobs, and even corporate identity.

I’d love to see ICGNtake up the task of education and political intervention. However, as someone with little influence with ICGN or its member funds, I’m putting my efforts into organizations and social media mechanisms aimed at the individual investor. Individuals create and guide organizations. Institutions may only push for better, less conflicted corporate governance when individuals push them to do so. Perhaps by pushing from both the top and bottom we can somehow meet with success in the middle. … However, if even 50% of retail shareowners were voting, I would bet they would also start putting pressure on the conflicted institutional investors like the mutual funds and university endowments that Monks is focused on.

Internet tools like,,, and have been built on shoe-string budgets. A small amount of money pumped into them and perhaps some consolidation of efforts might go a long way. Also promising would be a push toward an open system of client-directed voting. See comments to the SEC from and from James McRitchie. I hope readers will also support such efforts.

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WSJ: Governance guru Robert A.G. Monks blames investors for crisis (but both he and WSJ miss that irresponsible, ineffective shareholders is a consequence of limited liability and "public co" regulation)

September 22nd, 2011 No comments

I ran across the following at the NACD Directorship website: (emphasis added)

Governance guru blames investors for crisis

Robert Monks recently told the International Corporate Governance Conference that the losses shareholders incurred during the economic crisis prove investors must be more assertive in exerting their ownership over corporations.

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Interesting: Sarah Palin now sounds like a populist, anti-corporate LIBERTARIAN

September 21st, 2011 1 comment

From columnist Anand Giridharadas of the New York Times on September 9 (emphasis added):

when Ms. Palin strode onto the stage last weekend at a Tea Party event in Indianola, Iowa. Along with her familiar and predictable swipes at President Barack Obama and the “far left,” she delivered a devastating indictment of the entire U.S. political establishment — left, right and center — and pointed toward a way of transcending the presently unbridgeable political divide.

The next day, the “lamestream” media, as she calls it, played into her fantasy of it by ignoring the ideas she unfurled and dwelling almost entirely on the will-she-won’t-she question of her presidential ambitions.

So here is something I never thought I would write: a column about Sarah Palin’s ideas.

There was plenty of the usual Palin schtick — words that make clear that she is not speaking to everyone but to a particular strain of American: “The working men and women of this country, you got up off your couch, you came down from the deer stand, you came out of the duck blind, you got off the John Deere, and we took to the streets, and we took to the town halls, and we ended up at the ballot box.”

But when her throat was cleared at last, Ms. Palin had something considerably more substantive to say.

She made three interlocking points. First, that the United States is now governed by a “permanent political class,” drawn from both parties, that is increasingly cut off from the concerns of regular people. Second, that these Republicans and Democrats have allied with big business to mutual advantage to create what she called “corporate crony capitalism.” Third, that the real political divide in the United States may no longer be between friends and foes of Big Government, but between friends and foes of vast, remote, unaccountable institutions (both public and private).

In supporting her first point, about the permanent political class, she attacked both parties’ tendency to talk of spending cuts while spending more and more; to stoke public anxiety about a credit downgrade, but take a vacation anyway; to arrive in Washington of modest means and then somehow ride the gravy train to fabulous wealth. She observed that 7 of the 10 wealthiest counties in the United States happen to be suburbs of the nation’s capital.

Her second point, about money in politics, helped to explain the first. The permanent class stays in power because it positions itself between two deep troughs: the money spent by the government and the money spent by big companies to secure decisions from government that help them make more money.

“Do you want to know why nothing ever really gets done?” she said, referring to politicians. “It’s because there’s nothing in it for them. They’ve got a lot of mouths to feed — a lot of corporate lobbyists and a lot of special interests that are counting on them to keep the good times and the money rolling along.”

Because her party has agitated for the wholesale deregulation of money in politics and the unshackling of lobbyists, these will be heard in some quarters as sacrilegious words.

Ms. Palin’s third point was more striking still: in contrast to the sweeping paeans to capitalism and the free market delivered by the Republican presidential candidates whose ranks she has yet to join, she sought to make a distinction between good capitalists and bad ones. The good ones, in her telling, are those small businesses that take risks and sink and swim in the churning market; the bad ones are well-connected megacorporations that live off bailouts, dodge taxes and profit terrifically while creating no jobs.

Strangely, she was saying things that liberals might like, if not for Ms. Palin’s having said them.

“This is not the capitalism of free men and free markets, of innovation and hard work and ethics, of sacrifice and of risk,” she said of the crony variety. She added: “It’s the collusion of big government and big business and big finance to the detriment of all the rest — to the little guys. It’s a slap in the face to our small business owners — the true entrepreneurs, the job creators accounting for 70 percent of the jobs in America.”

Is there a hint of a political breakthrough hiding in there?

The political conversation in the United States is paralyzed by a simplistic division of labor. Democrats protect that portion of human flourishing that is threatened by big money and enhanced by government action. Republicans protect that portion of human flourishing that is threatened by big government and enhanced by the free market.

What is seldom said is that human flourishing is a complex and delicate thing, and that we needn’t choose whether government or the market jeopardizes it more, because both can threaten it at the same time.

Ms. Palin may be hinting at a new political alignment that would pit a vigorous localism against a kind of national-global institutionalism.

On one side would be those Americans who believe in the power of vast, well-developed institutions like Goldman Sachs, the Teamsters Union, General Electric, Google and the U.S. Department of Education to make the world better. On the other side would be people who believe that power, whether public or private, becomes corrupt and unresponsive the more remote and more anonymous it becomes; they would press to live in self-contained, self-governing enclaves that bear the burden of their own prosperity.

No one knows yet whether Ms. Palin will actually run for president. But she did just get more interesting.

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Why Some Anarchists Hate Anarchy (hint: they love corporations)

September 21st, 2011 1 comment

Just saw a post by Stephan Kinsella from last month on the main blog, and couldn’t resist a little fun with his closing paragraph, which I tweaked slightly:

So: limited liability corporations are the most important of all capitalist organizations.

And you can’t have corporations in anarchy, since corporations (and their essential characteristics like limited liability of shareholders) come from artificial edicts by the legislature of a state.

So, we must have a state. QED.

(Just playing.)


Some further thoughts on corporations are here:


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