We have a problem with absentee owners. Remember several years ago when, under the Clinton administration, there was pressure on absentee fathers to bear responsibility for caring for their children? We have the same problem with corporations. But in this case there are no parents at all. No oversight and no one making sure that corporations and management act sanely and responsibly.
When corporations were owned by flesh-and-blood individuals, the experience was, generally speaking, that flesh-and-blood individuals acted the same way with respect to their corporations that they acted in their own lives. They also had concerns for the externalities of the corporation, and they had concerns for its long-term implications.
Ownership has become more diffuse and corporations now have only a nominal accountability to any identifiable ownership. By identifiable owner, I mean a shareholder or a group of shareholders who are willing to accept the responsibility of being stewards and monitoring the functioning of the corporation. It’s a case where the word “owner” communicates an incorrect and even harmful impression. Traditionally, the shareholder register consisted of a group of the names of individuals who owned stock in that corporation. As a practical matter today, it’s almost beyond belief that you would find the name of an individual on a shareholder register.
In fact, more than 70 percent of all publicly traded shares in the top US corporations are held by institutional owners and managed by trustees – legal creatures with the obligation to responsibly manage trust property in the interests of, and for the exclusive benefit of, plan participants and beneficiaries.
Most of us who have ownership in corporations these days – many of us through retirement plans, 401(k) plans, individual retirement accounts (IRAs), mutual funds and things like that – don’t really “own” stock in the sense we own things like our houses or cars. There are many different types of shareholders, and the interests of the different parties are not compatible. Attorney Ira Millstein came up with a very appropriate metaphor describing share owners as being like the animals in a zoo. Yes, they’re all animals, but my goodness, they are more different than they are alike.
So, without traditional owners who run the company, we must rely on large managing shareholders, like pension plans or trustees of funds and endowments, to take on the role of owners. But they haven’t. These are the absentee owners. And without owners, corporations run amok – like children without a chaperone. There’s no accountability and decisions are made without regard for consequences. That’s why in my new book, Citizens DisUnited: Passive Investors, Drone CEOs and the Capture of the American Dream, I call these ownerless entities corporate drones.
They are analogous to the military vehicles that have enormous power and capacity for good and ill. They insulate operators from risk while casting vast externalities and costs onto society.
Want an example? Look at the large banking institutions in the mortgage bubble and financial crisis. We don’t even know who owns them but we can certainly name the CEOs. Nearly all of them came out of the crisis quickly, made profits and gave bonuses to upper management while the rest of society is still struggling with underwater mortgages and unemployment. Who bailed the banks out? We did. Their problem. Their fault. Our responsibility.
This is externalizing at its core: putting the problems and responsibilities of corporate operations off onto society while keeping the benefits and profits for themselves. I think this raises the question as to the appropriateness of corporations that do not have an identifiable owner. It has become increasingly clear to me that it’s very dangerous to have these ownerless corporations — drone corporations — and that there needs to be a way of dealing with the problem of the risks that they present. The author Chrystia Freeland said that the US, “has created a system of capitalism without capitalists, of private sector companies whose owners have abdicated responsibility for the companies that belong to them.” Someone has to take the wheel.
So about now, you’re asking, Who can do this? Who has enough shares, enough clout and enough status to lead the charge? This is what I lay out in the book: foundations and university endowments have particular missions to improve the lot of human beings on earth – and I believe this implies that they also have responsibility to be stewards of the companies they own. The large foundations like the Gates Foundation, Ford Foundation, Packard Foundation and the university endowments like Harvard, Yale and Stanford have enough shares and enough standing to be leaders. Along with the large pension funds and mutual funds, these are the groups that manage a vast percentage of our nation’s wealth.
-
Calpers, with over $220 billion under management (Public pension fund).1
-
Harvard, with $30-plus billion, and Yale, with $16.7 billion (University endowments).2
-
Gates Foundation, with $34.6 billion, and Ford Foundation with $10.9 billion (Large foundations and private charities).3
-
Vanguard, with $1.6 trillion under management, and State Street Corporation with $23 trillion (Large mutual funds).4
At the end of the day, we don’t need everybody in all categories of ownership to join in. We just need a few of these organizations to work together so that every corporation has at least one group of effective functional motivated owners to act as stewards and provide that element of accountability that is essential for corporations to exist harmoniously in a democratic society. As Warren Buffett has said, “If you had the top five institutional investors, and when they saw something outrageous the five of them spoke together … the world would change.”5
References
1. Tomio Geron, “CalPERS Returns 1 percent for Fiscal Year,” Forbes, July 16, 2012.
2. Rob Kozlowksi, “Endowment execs top pay list for tax-exempt institutions,” Pensions & Investments, November 7, 2011.
3. “Top Funders: Top 100 U.S. Foundations by Asset Size,” Foundation Center, April 17, 2013.
4. “Vanguard Group Is Increasing Its Positions In These Stocks,” SeekingAlpha.com, February 3, 2012, and “State Street Corporation at Goldman Sachs Financial Service Conference Transcript,” AlacraStore.com, (accessed January 11, 2013).
5. Nell Minow,”An Interview With Warren Buffett,” GMIRatings video on YouTube, part six of nine, September 2010, (accessed January 11, 2013).
© 2013 Robert A.G. Monks, author of Citizens DisUnited: Passive Investors, Drone CEOs, and the Corporate Capture of the American Dream.
Truthout Is Preparing to Meet Trump’s Agenda With Resistance at Every Turn
Dear Truthout Community,
If you feel rage, despondency, confusion and deep fear today, you are not alone. We’re feeling it too. We are heartsick. Facing down Trump’s fascist agenda, we are desperately worried about the most vulnerable people among us, including our loved ones and everyone in the Truthout community, and our minds are racing a million miles a minute to try to map out all that needs to be done.
We must give ourselves space to grieve and feel our fear, feel our rage, and keep in the forefront of our mind the stark truth that millions of real human lives are on the line. And simultaneously, we’ve got to get to work, take stock of our resources, and prepare to throw ourselves full force into the movement.
Journalism is a linchpin of that movement. Even as we are reeling, we’re summoning up all the energy we can to face down what’s coming, because we know that one of the sharpest weapons against fascism is publishing the truth.
There are many terrifying planks to the Trump agenda, and we plan to devote ourselves to reporting thoroughly on each one and, crucially, covering the movements resisting them. We also recognize that Trump is a dire threat to journalism itself, and that we must take this seriously from the outset.
After the election, the four of us sat down to have some hard but necessary conversations about Truthout under a Trump presidency. How would we defend our publication from an avalanche of far right lawsuits that seek to bankrupt us? How would we keep our reporters safe if they need to cover outbreaks of political violence, or if they are targeted by authorities? How will we urgently produce the practical analysis, tools and movement coverage that you need right now — breaking through our normal routines to meet a terrifying moment in ways that best serve you?
It will be a tough, scary four years to produce social justice-driven journalism. We need to deliver news, strategy, liberatory ideas, tools and movement-sparking solutions with a force that we never have had to before. And at the same time, we desperately need to protect our ability to do so.
We know this is such a painful moment and donations may understandably be the last thing on your mind. But we must ask for your support, which is needed in a new and urgent way.
We promise we will kick into an even higher gear to give you truthful news that cuts against the disinformation and vitriol and hate and violence. We promise to publish analyses that will serve the needs of the movements we all rely on to survive the next four years, and even build for the future. We promise to be responsive, to recognize you as members of our community with a vital stake and voice in this work.
Please dig deep if you can, but a donation of any amount will be a truly meaningful and tangible action in this cataclysmic historical moment.
We’re with you. Let’s do all we can to move forward together.
With love, rage, and solidarity,
Maya, Negin, Saima, and Ziggy