Failure of CG has led to capture
For the past thirty years I have focused my energies on
corporate governance and the legitimacy of corporate power. And by
legitimate, I mean that the people who exercise power for the corporations need
to be accountable to somebody. Over the years, it has become clear that
they really are not accountable to anybody, and our experiment in
self-regulation and minimal oversight has failed. In practice, this has
meant that a small group of individual CEOs exercise power over financing
elections and lobbying the passage and enforcement of laws.
Where are we now?
The failure of owners to be involved in overseeing the
corporations they own and the failure of government to enforce rules already on
the books has led to what is known as capture. Capture means, to
me, the power to allocate the resources of government, in this case the U.S. federal
government. We've seen this in the bailout, in tax leniency and in
subsidies. We've seen it in deregulation and the failure to enforce
regulations that already exist.
Capture is a very predictable and logical outcome of our
failures. All the corporate governance efforts I've been involved with
have stressed the internal accountability of those with power in a
corporation. And one of the essential elements of accountability that are
critical for long term credibility of sustainable corporations is that they be
subject to a governing law, and that they comply with law in a full way and not
in a grudging way.
So this is about corporate power - excessive corporate
power. The balance of power is not only tipped but so out of skew that
we've come to accept it as normal. We excuse it by saying that
corporations need to be competitive or that they create jobs. We excuse
it by saying that CEOs take risks and therefore need outsized salaries to
compensate for that. But while some of that may true, corporations also
take a lot from our society: educated workforce, roads, subsidies, roads,
military protection, diplomatic work done by our government and more.
Furthermore, they don't take responsibility for the by-products or off-products
of their work: pollution, health issues, wear and tear on the
infrastructure paid for by citizens. Society is a give-and-take
proposition but for now, the powerful take much more than they contribute and
that is not sustainable.
For me, corporate governance has failed and it's time to
move on. These larger issues are where I see the discussion going so I'll
be writing more on this topic in the weeks to come. Please comment or
send me your thoughts. There's so much to talk about and I look forward
to hearing what you think.
Read more blog posts on corporate governance at the Robert
A.G. Monks blog
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