The Age of Corporate Treason-Patriotic Yardsticks for Unpatriotic Giant Corporations

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Weekend Edition May 17-19, 2013

Patriotic Yardsticks for Unpatriotic Giant Corporations

The Age of Corporate Treason

by RALPH NADER

Why are big, global U.S. corporations so unpatriotic? After all, they were created in the U.S.A., rose to immense profit because of the toil of American workers, are bailed out by American taxpayers whenever they’re in trouble, and are safeguarded abroad by the U.S. military.

Yet these corporate goliaths work their tax lawyers overtime to escape U.S. taxes. Many pay less than you do in federal income taxes. Imagine corporations, like General Electric, have not paid federal income taxes on U.S. profits for years.

Mega corporations have abandoned U.S. workers by entrenching “pull-down” trade agreements that make it easier than ever to ship jobs and whole industries to fascist and communist regimes abroad which keep their workers near serfdom. Remember, the U.S. has run large trade deficits for the past 30 years as a result of anti-American trade deals pushed by these global companies. These goliaths are pressing for the Trans-Pacific Partnership, a trade agreement that will further pull down our economy. (See http://www.citizen.org/page.aspx?pid=1328.)

Corporate CEOs are raiding and draining traditional pension plans for millions of workers who are left without their expected and earned pension payments on retirement. (For more information see Ellen E. Schultz’s book Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers.)

They are freezing the federal minimum wage, for low income service jobs that they cannot export, at $7.25 per hour, leaving thirty million workers today making less than workers made in 1968,  inflation adjusted. Having wages that go backwards into the future means workers cannot afford the basic necessities of life for themselves and their children.

Giant companies hire legions of lobbyists to weaken or abolish consumer, worker and environmental safety and health laws, to stop our country from joining all other Western Nations with full Medicare for all.  Corporate campaign cash increasingly flows to indentured politicians, who in turn do the bidding of the corporate paymasters at your expense.

We’ve yet to find a CEO of a U.S. global corporation who will even go through the motions at their annual shareholders meeting standing up and, in the name of the company, pledging “allegiance to the United States…with liberty and justice for all.” When asked, as was General Motors, the CEO refused.

Charge companies with unpatriotic behavior and you’ll tap a nerve or two. The munitions companies, like Lockheed Martin and Boeing, put ads on television and radio asserting how their modern weapons back up our troops who are sent to expand the Empire. Of course, defense contractors never mention their huge profits, cost over-runs and their staffing the higher echelons of the Pentagon with their own appointees. Nor do these arms merchants ever raise a patriotic objection to the criminal wars of aggression conducted by Bush/Cheney against the defenseless people of Iraq, whose tottering dictator, formerly a U.S. ally, was not a threat to America.

Other companies are trying softer promotions of their claimed care for America. Have you seen the lengthy ad campaign by Chevron that starts with some bold demand by a pictured ordinary person? One such ad begins “Oil companies SHOULD support the communities they’re a PART OF” (Chevron’s emphasis) and, invariably, Chevron answers “we agree,” and lists their charities here and abroad. Eval‎uating corporation philanthropy is for another time; suffice it to say that not one giant corporation exceeds one percent of their pre-tax profits, when the law allows them to give up to five percent, deductible.

Do you think that all of the above only comes from consumer/worker advocates? Then read a new, paperback book by Robert A.G. Monks, titled Citizens Disunited: the Corporate Capture of the American Dream.

Monks, a former corporate lawyer, corporate CEO, founder of companies, bank chairman, and investor-advocate extraordinaire, writes memorably about corporate excesses.

He quotes an Apple executive who told The New York Times: “We sell iPhones in over a hundred countries. We don’t have an obligation to solve America’s problems.” Monks responds: “This is what greed looks like in the global epoch of corporatism: plunder the Treasury, to be sure, but then deny all sense of responsibility to your country of domicile, outsource all obligations, and, like maggots, set to work destroying the host from inside by exporting its jobs and depleting its revenue sources.”

He then cites Clyde Prestowitz, founder of the Economic Strategy Institute, who wrote that, as a top U.S. government trade negotiator, he went to great lengths to open up the Japanese market for Apple in the early nineteen eighties, adding: “We did all we could and in doing so came to learn that virtually everything Apple had for sale, from the memory chips to the cute pointer mouse, had had its origins in some program wholly or partially supported by U.S. government money.”

Monks sums up: “Henry Ford’s great success was built in part on his decision to pay his workers a high enough wage so that they could afford the products they were producing. No more. The shrinking middle class, the widening gap between the rich and the poor – these are some of those American ‘problems’ that American-born-and-bred corporations like Apple really have no time for.” For more galvanized specifics, please read and absorb this book!

Other high, former corporate officials are speaking out. Former general counsel of USAir, Lawrence Stentzel, called on reluctant federal prosecutors to hold corporate wrongdoers’ feet to the fire and force them to admit to their wrongdoing. He also demanded that the Justice Department create a user friendly database of corporate wrong doing. (See corporatecrimereporter.com.)

Big U.S. corporations have long demanded a legal system where they are defined as “people,” so as to get all of our constitutional rights while they expand their privileged powers and immunities. Well, why don’t we measure them by the many patriotic standards that we apply to ourselves, the real American people.

Getting these giant firms on the defensive is the first step for the resurgence of the people so that corporations become our servants and do not remain our masters.

Ralph Nader is a consumer advocate, lawyer and author of Only the Super-Rich Can Save Us! He is a contributor to Hopeless: Barack Obama and the Politics of Illusion, published by AK Press. Hopeless is also available in a Kindle edition.

http://www.counterpunch.org/2013/05/17/the-age-of-corporate-treason/

Citizens DisUnited: Passive Investors, Drone CEOs, and the Corporate Capture of the American Dream

By Robert A.G. Monks

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Democratic capitalism—the source of America’s vast wealth, the foundation of our entire economic system—is threatened as never before, not from without but from within. Far too much of American business is being run for the personal enrichment and glorification of its managers. This book shows how that happened and unveils, for the first time, a new study showing that corporations “un-owned” by their shareholders—corporate “drones”—are far worse corporate citizens and have significantly lower average shareholder returns.

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Citizens DisUnited: Passive Investors, Drone CEOs and the Corporate Capture of the American Dream is an indictment of corporate executives divert shareholder assets to undermine democracy and enrich themselves, putting both capitalism and democracy at risk. Once again, Monks lays bare the problems of governance and government -- problems that are undermining our democracy and creating a system controlled by CEO kings. He calls out the perpetrators by name and gives specific fixes that must be done -- immediately.

Far too much of American business is being run for the personal enrichment and glorification of its manager-kings. This book shows how that happened and unveils, for the first time, a new study showing that corporations "un-owned" by their shareholders -- corporate "drones" -- are far worse corporate citizens and have significantly lower average shareholder returns than firms in which owners still exercise authority over management.

http://www.smartbooks.com/book_display.php?isbn13=9781939282101

Citizens DisUnited

Posted by Robert A.G. Monks, Principal, Lens Governance Advisors, on Thursday April 11, 2013 at 9:27 am

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Tags: Boards of Directors, General governance, Governance reform, Management, Robert Monks, Shareholder power

Editor’s Note: Robert Monks is the founder of Lens Governance Advisors, a law firm that advises on corporate governance in the settlement of shareholder litigation.

My newest book, Citizens DisUnited: Passive Investors, Drone CEOs and the Corporate Capture of the American Dream, has been in the works for the last year, and is really the culmination of thirty years of work in corporate governance, activism and government. It was prompted by frustrations and failures, in many ways. But it was through those frustrations that I gained clarity on the problems facing our nation. Not just problems in the boardroom but the larger issues of power that tie corporations to the power structure in Washington and how it affects our society. The specific thoughts that led to this book began almost two years ago with a speech I gave at ICGN in Paris and are further illuminated in some new research done for the book by GMIRatings’ Ric Marshall.

In the course of planning the book, I had begun to think of some corporations as “drones” – in the sense that they are untethered from reality and responsibility. We define them as corporations, “in which no single shareholder retains a principal position, defined by the SEC as 10 percent or more.” The owners aren’t at the helm — but manager-kings are. And there are no limits to prevent these CEOs from enriching themselves at the shareholder expense or from shifting the burden of externalities onto society.

Ric, in the meantime, had begun to find empirical data that showed that,

• Drones are more likely to have other, active corporate CEOs on their boards.
• Drones are also more likely to have present and former CEOs on their compensation committees.
• Non-executive director shareholdings at corporate drone boards average less than half the dollar value of their non-drone counterparts.

And he could list the “drone” companies by name. So that became the nexus of the book. Who are the companies and what impact are they having on our culture and our government? Who can fix this and how?

I don’t want to spoil the ending for you so I’ll just introduce the book with a short excerpt from the foreword.

An excerpt from the introduction to Citizens DisUnited: Passive Investors, Drone CEOs and the Corporate Capture of the American Dream

When the freedom they wished for most was freedom from responsibility, then Athens ceased to be free and was never free again.

— Edith Hamilton

This book is a warning, a plea for involvement, and a call to arms.

Democratic capitalism—the source of America’s vast wealth, the foundation of our entire economic system—is threatened as never before in my eighty years, not from without but from within. Shareholders today no longer own, except in the narrowest legal sense, the corporations they have invested in. Emboldened by the Supreme Court and enabled by a compliant Congress and compromised regulators, America’s CEOs have staged a corporate coup d’état. They, not the titular owners of the businesses, decide where and how company resources will be deployed, what laws will be evaded in the pursuit of short-term gain, what offshore havens profits will be stashed in to avoid taxation, and critically, how lavishly the CEOs themselves will be compensated.

A decade ago, at an annual meeting of the ExxonMobil Corporation, I addressed then-CEO and board chairman Lee Raymond as “Emperor.” He had, after all, all the trappings of an absolute ruler, including the ability to utterly control the proceedings at this supposedly “democratic” interface between ExxonMobil and its shareholders. Back then, I thought of Raymond as something of an outlier among chief executives. Today, his type is commonplace. Far too much of American business is being run for the personal enrichment and glorification of its manager-kings.

This book will show how and why that is so. It will also unveil, for the first time, a new study showing that corporations “un-owned” by their shareholders—what I term corporate “drones”—are far worse corporate citizens and have significantly lower average shareholder returns than firms in which owners still exercise authority over management. Manager-kings, it turns out, are bad both for society and for business itself.

Seven decades ago, Adolph A. Berle warned that granting managers free rein posed the “danger of a corporate oligarchy coupled with the probability of an era of corporate plundering.” [1] Both fears have been fulfilled in our own time, but this takeover hasn’t happened in a vacuum. Passive index funds, algorithm trading, the incessant churn of financial markets around the world have all served to weaken the bonds of ownership and divorce shareholders from any compelling sense of responsibility for the corporations in which they have invested.

That must change if the plundering is to stop. It must change if America is again to be seen as a trustworthy place to do business. (That the United States ranked 19th among global countries on Transparency International’s 2012 Corruption Perceptions Index should be a source of national shame). [2] But this change can be led only by the Great and Good of Investing—the leading foundations and university endowments, the vast public employee pension funds, the colossal index funds that hold an ever-increasing share of the national wealth. Again, in this book I will show why that is so, and I will propose several ways in which the trustees of these foundations and funds can begin to reassert ownership and fulfill responsibilities too long neglected. In investing as in government, the price of freedom is eternal vigilance.

Endnotes:

[1] Adolf A. Berle and Gardiner C. Means, The Modern Corporation and Private Property, (New York: Harcourt Brace, 1968), p. 311.
(go back)

[2] “Corruptions Perceptions Index, 2012,” Transparency International (accessed January 29, 2013).
(go back)

2 Comments

1. Citizens DisUnited both delights and informs in a way only Bob Monks can.

   His lifework has been delineating the underlying dynamics of corporate power to devise a system that combines wealth creation with societal interests.

   No one else has been as engaged as Monks with such depth from so many angles. His insights are enlightening. His book with Nell Minow, Power and Accountability, inspired a generation of activists. Citizens DisUnited will do the same for a whole new generation.

   There may have been a shareholder’s revolution but funds based on indexing and algorithms have little or no incentive to spend any substantial effort on monitoring. Monks documents this problem and its implications better than anyone.

   He also points creatively to possible solutions. It is that direction that needs more attention and debate. Only when a new paradigm works better than the old one will the old one be rejected. I’ll review Citizens DisUnited on my site next week and will attempt to build on this important work by Robert A.G. Monks.

   Comment by James McRitchie — April 11, 2013 @ 11:59 am

2. [...] on Agency Capitalism: Part 1, Part 2 and Part 3, as well as Robert A.G. Monks’ new book, Citizens Disunited. View more from In the Boardroom with Lucy [...]

   Pingback by Video Friday: Lucy Marcus Interviews Steve Waygood | Corporate Governance — April 15, 2013 @ 12:01 pm

http://blogs.law.harvard.edu/corpgov/2013/04/11/citizens-disunited/

“A Corporatist State Or A Government and A Nation of People?”

Posted on April 18, 2013 by Jeff Clements

Twixt Darkness and That Light: “A Corporatist State or A Government and A Nation of People?”

A review of Citizens Dis-United: Passive Investors, Drone CEOs, and the Corporate Capture of the American Dream, by Robert A.G. Monks.

Who said the following?

“Democratic capitalism is threatened as never before . . . not from without but from within.”

“Government capture [by corporations and CEOs] is the American condition.”

Judicial effort to defend Citizens United v. FEC “borders on the clinically obtuse or borderline deranged.”

“America’s corporations today enjoy an absolute reign. They and they alone have the power to control the rules under which they function. They have the first say on the allocation of public resources and they have exempted themselves from nearly all financial obligations to the nation and its people. This is not a prediction of what’s to come. This is the present state of affairs, the America we live in right now.”

A young Occupy Wall Street activist? A libertarian Tea Party member? Someone ‘who just doesn’t understand how corporations and the economy work?’

No, they are the most recent words of Robert Augustus Gardner Monks, who in his eight decades has been CEO of an oil and coal business, a corporate lawyer, a founder of Institutional Shareholder Services, Inc. and several other businesses dealing with corporate governance, a state Chair of the Republican party and Republican candidate for U.S. Senate, an author of several books on corporate governance and shareholder democracy, a member of the Boards of Directors of numerous large corporations, a trustee of retirement systems, and a public servant in the Administrations of Presidents Ronald Reagan and George H.W. Bush.

Now he’s out with a new book, Citizens Dis-United: Passive Investors, Drone CEOs, and the Corporate Capture of the American Dream. It is a clear, reasoned, and passionate call to see the danger, and to act before it’s too late.

This book is compelling and urgent. It reflects a great decency, patriotism, and honesty. Bob Monks tells the truth, even about where he thinks he has been wrong.

Monks has done more, and knows more, about shareholder democracy and corporate governance than just about anyone. Yet the crisis of our democratic capitalism has reached the point where Monks says that corporate governance is a “myth,” a “chimera at best” and “a fraud at worst.” And what about “shareholder democracy” as a solution to the problem of Citizens United and the corporate capture of our government, elections and culture?

I still believe that in an ideal world, or even a rational one, an empowered and unencumbered electorate is the best remedy to tyranny of any kind, but current circumstances give me no choice but to abandon a position on which I have staked a good portion of my professional life. The atom of ownership is too smashed, and the proxy system through which corporate voting is carried out has been too corrupted to give any hope of a democratic resolution to the multiple ills of corporate governance.

Citizens Dis-United smashes some myths: The myth that the growth of corporate profits can be assumed to be always of worth to America or Americans; the myth that corporate spending is “speech” or that republican government can survive Citizens United and the corporate capture of the government’s branches; the myth that anyone or anything is now in place to ensure that corporations function as intended, to serve a public purpose or even to serve the interest of the purported owners, the shareholders.

Monks shows how “America’s CEO’s have staged a corporate coup d’etat.” The CEOs, “not the titular owners of the businesses, decide where and how company resources will be deployed, what laws will be evaded in the pursuit of short-term gain, what offshore havens profits will be stashed in to avoid taxation, and critically, how lavishly the CEOs themselves will be compensated.”

It should go without saying but it needs to be said again, as Monks does, that this is not about “destroying the corporation but taming it and harmonizing its vast power with human values.”

So what to do?

If you’ve read Corporations Are Not People, you know what I think: (1) A national movement for a Constitutional amendment to reverse the power dynamic of Citizens United and Buckley v. Valeo that accelerates the crisis of democratic capitalism and blocks any chance at real reform; (2) campaign finance reform; (3) legal advocacy in the courts to challenge the corporate capture of our judiciary and Constitutional jurisprudence; and (4) a reform of state and federal corporate laws to better ensure accountability and social benefit.

In Citizens Dis-United, Monks does call for overturning Supreme Court decisions such as Citizens United but his primary and admirable focus is his passionate plea to those who own massive amounts of public company shares to step up to their responsibilities. He calls for decisive and prompt action from those who, like himself, have been blessed by the previous success of American democratic capitalism, who know the truth about corporations and who have access to the few remnant levers left that might yet function.

He identifies the foundations, the pension funds, and the great universities that own hundreds of billions of dollars in shares in corporations that are now run amok. He urges “those fortunate and able enough to prosper in our society [to] stop taking the ‘commons’ for granted, and [to] begin committing their time, values, and integrity to the functioning of companies of which they are the owners.”

Finally, Monks writes of shame. That shame, that “great and public transgression . . . to have known vast harm was being done and to have the power, standing, and resources to intervene, and yet to have failed to act. That is a shame not easily overcome, for the individual or for the society that allowed it to happen.”

In one sense, Monks is shaming those with power and standing (the “great and the good,” as Monks calls them, perhaps with tongue in cheek), and he is trying to move them to action. Yet, this should not be misunderstood as mere finger-pointing at others. Indeed, Monks describes this book as an “atonement for my own shame.”

And he should not feel alone there. One challenge of citizenship in a nation dedicated to a government of the people is that our pointing of fingers or blaming of others only goes so far. In the end, every one of us, including those of us who are not among the leaders of foundations, pensions, and universities, are in the same position of knowing that ‘vast harm was being done’, and having something, big or small, to offer to help. Will we?

I do have a couple of notes of reservation about Citizens Dis-United. First, the emphasis on calling for rescue from the Gates Foundation, Warren Buffet, Harvard University and the like is a little reminiscent of Ralph Nader’s brilliant semi-satire “Only the Super-Rich Can Save Us!” We do need an enhancement of responsibility and virtue from those who have riches and power. But we need that from all quarters, and, in my view, any lasting success for the American experiment and human freedom requires engagement of the problem of corporate power at all levels of American society.

My second reservation is not about anything Monks says but about the unfortunate cover. A leader of the conservative Constitution Party once said that Americans “have more to fear from the U.S. Chamber of Commerce than from al qaeda.” Nevertheless, a cover with smoke and fire rising from the Capitol with a wing-tip clad CEO hitting the trigger is a little much. Don’t let the cover dissuade you from turning to the wisdom within.

Monks has accomplished a great deal in this relatively short book. I can’t help thinking that not the least of Monk’s accomplishments in Citizens Dis-United might be a personal reconciliation with his roots. Monks sometimes describes himself as a “traitor to his class,” one who exiled himself in Maine from the Boston Brahmin world in which he was raised. With Citizens Dis-United, though, Monks reminds us of the best traits of that lost world: duty, trusteeship, responsibility; a resistance to placing the acquisition of wealth above virtue and other human aspirations, and a distaste for extravagance; an undying dedication to the commons, and to the commonwealth and republican government; and yes, a sense of shame.

Citizens Dis-United is not perfect. Bob Monks is not perfect. None of us is perfect. But we are human, we are Americans, and we all can do something beyond ourselves to tackle the very real and present danger that Monks describes so well. If you think the times don’t merit dramatic calls for selfless action, read Monks’ book as soon as possible. It’s available here: http://www.amazon.com/dp/1939282101.

You can find out more about Monks and his work here: http://www.ragm.com/

About Jeff Clements

Jeff Clements, an attorney and author, is the president and co-founder of Free Speech for People, a national, non-partisan campaign to challenge the creation of Constitutional rights for corporations, overturn Citizens United v. FEC, and strengthen American democracy and republican self-government. He is the author of the Corporations Are Not People (Berrett-Koehler, 2012). Mr. Clements, an attorney, has represented and advocated for people, businesses and the public interest since 1988. Mr. Clements served as Assistant Attorney General and Chief of the Public Protection & Advocacy Bureau in the Massachusetts Attorney General’s Office from early 2007 to 2009. As Bureau Chief, he led more than 100 attorneys and staff in law enforcement and litigation in the areas of civil rights, environmental protection, healthcare, insurance and financial services, antitrust and consumer protection. Mr. Clements also served as an Assistant Attorney General in Massachusetts from 1996 to 2000, where he worked on litigation against the tobacco industry and handled a wide range of other investigations and litigation to enforce unfair trade practice, consumer protection and antitrust laws. In private practice, Mr. Clements has been a partner in the Boston law firms of Clements & Clements, LLP and Mintz Levin. He also has practiced in Maine, where he has represented clients in a variety of appeals and litigation, and in investigations and prosecutions by the U.S. Attorney’s Office and Maine Attorney General’s Office. In the 1990s, Mr. Clements was elected as a Trustee and President of the Board of Trustees of the Portland Water District, a public agency responsible for protecting and delivering safe drinking water and ensuring proper treatment of wastewater for 160,000 people in Portland and South Portland, Maine and several surrounding communities. He was a co-founder, officer, and director of Friends of Casco Bay, an environmental advocacy organization focused on protection and stewardship of Maine’s Casco Bay. He also has served as a Trustee and President of the Board of The Waldorf School in Lexington, Massachusetts. Mr. Clements graduated with distinction in History and Government from Colby College in 1984, and magna cum laude with a concentration in Public Law from the Cornell Law School in 1988. He lives in Concord, Massachusetts with his wife and three children.

View all posts by Jeff Clements →

http://corporationsarenotpeople.com/2013/04/18/a-corporatist-state-or-a-government-and-a-nation-of-people/