Shareholder control over large corporations is worryingly weak and the unrestrained hunt for profits is taking a toll on the environment and society. In Corpocracy, corporate lawyer, venture capitalist, and shareholder activist Robert Monks reveals how corporations abuse their power and what we the people must do to rein them in. In a clear and careful analysis, Monks outlines a plan for reconciling the competing interests of corporations and society through thoughtful shareholder activism.
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The modern institutional trustee in its incarnation as majority owner of American business has conflicts of interest of debilitating proportions. Notwithstanding the inveterate and unchanging rigour of trust law requiring the fiduciary to administer assets "for the exclusive benefit of plan participants", today's conglomerate – understandably enough in a world where there is no enforcement – persistently favours its own interest in pleasing present and potential customers. There has been no enforcement of breach of fiduciary obligations either by the executive or judicial branches of government. In light of the trend of some courts towards the Law & Economics policy of "efficient compliance", there must be some doubt as to whether courts will require compliance with trust law.What has emerged is a badly crippled owner. Enforceability of the trust promise is what is required for the concept of "fiduciary ownership" to flower.Ironically, casting the majority owner of public companies in trust mode has twice cursed the beneficiaries. On the one hand, the trustees made extensive use of trust assets to protect themselves against any possibility of liability by hiring "consultants", the sum of whose contribution to the economic welfare of participants is highly problematic. Their real value is in providing trustees defence against any claim of negligence. On the other hand, trustees, with "no skin in the game" were motivated to adopt the most minimalist policies of investment, thus ensuring mediocre results. The only fiduciaries, largely public employee pension plans, free of conflict of interest are identified with what might be styled the "anti business" end of the spectrum of ownership. Until the balance of owners participate, the promise of "fiduciary capitalism" will not be fulfilled.
What do U.S. share owners really want? What should be the roles of the different stakeholders such as employee owners and institutional investors? In what ways will ownership structures change? What tools will be available for motivating employees, managers, share owners, etc.? What will be the structure of tomorrow's corporation?
"As the number of institutional investors increased, some prophets said that these investors, moved by their stakes and informed by their expertise, would begin to play in earnest the supervisory roles of the legendary stockholder. But through the 1960's [equally true through the 1990's] the record showed little to bear out the prophecies. The size of their assets commanded respect when institutional investors sought information; by their probing they introduced some fresh surveillance into corporate affairs. Nonetheless, the institutional investors generally behaved as individuals did; like individuals, they expressed dissatisfaction with the government of a corporation by selling out rather than by voting their shares for new men or different decisions. On rare occasions institutional investors cast their weight for a change in top management; rarer was evidence of their influence brought to bear on particular issues of corporation policy."
In the wake of the recent global financial collapse the timely new edition of this successful text provides students and business professionals with a welcome update of the key issues facing managers, boards of directors, investors, and shareholders. In addition to its authoritative overview of the history, the myth and the reality of corporate governance, this new edition has been updated to include:analysis of the financial crisis;the reasons for the global scale of the recessionthe failure of international risk managementAn overview of corporate governance guidelines and codes of practice;n.
