American corporations today are like the great European
monarchies of yore: They have the power to control the rules under which they
function and to direct the allocation of public resources. This is not a
prediction of what's to come; this is a simple statement of the present state
of affairs. Corporations have effectively captured the United States: its
judiciary, its political system, and its national wealth, without assuming any
of the responsibilities of dominion. Evidence is everywhere.
1. The "smoking gun" is CEO pay.
Compensation is an expression of concentrated power - of enterprise power
concentrated in the chief executive officer and of national power concentrated
in corporations. Median US CEO pay for 2010 was up 35 percent in the midst of a
lingering recession, while CEO pay over the last decade has doubled as a
percentage of pre-tax corporate income. Yet there has been no justification for
current levels of CEO pay
based on economic value added.
When Lee Raymond retired as CEO of ExxonMobil
at the end of 2005, after six years at the helm of the merged firm and another
six as head of Exxon before that, he walked away with more than a quarter
billion dollars in realizable equity. In his final year alone, Raymond received
in excess of $70 million in total compensation - an hourly wage of about
$34,500 calculated at 40 hours a week for 50 weeks. No metric can justify such
a raid on the corporate treasury and shareholder equity, but Raymond is only a
particularly egregious and early example of what has since become common
practice. Little wonder that the driving concern of banks receiving TARP
"bailout" money was to pay it back so as to escape any restriction on executive
2. Retirement risk has been
transferred to employees. During
the same period that CEOs were doubling their own compensation, the "best" CEOs
of the "best" companies abrogated the century-old commitment by employers to
provide pensions to their workers. IBM has been the corporate leader in
abolishing a "real" pension system for its employees. The 2006 elimination of
on-going defined benefit plans will "save [IBM] as much as $3 billion through
the next few years and provide it with a more 'predictable cost structure'," TK
said at the time. Translation: The worker bees are on their own.
This is the essence of "capture" - CEOs are enriched,
while all other corporate constituencies, including government, are left with
liabilities. A relatively few autocrats have taken control over the policies
and wealth allocation of the United States.
3. The financial power of American
corporations now controls every stage of politics -
legislative, executive, and ultimately judicial. With
its January 2010 decision in the Citizens
United case, the Supreme Court removed all legal restraints on the
extent of corporate
financial involvement in politics, a grotesque decision that can have only
one effect: maximizing corporate - not national - value. Today's CEOs
have been granted the power to direct political payments and organize PAC
programs to achieve objectives entirely in their own self-interest, and they
have been quick to use it.
More than $300 million was "invested" by corporations in
the 2008 Presidential elections. The totals will be vastly higher in 2012 when
the full impact of Citizens United is expressed, and the distribution
will be politically agnostic. As Bill Moyers recently noted, President Obama
"has raised more money from banks, hedge funds and private equity managers than
any Republican candidate."
4. Capture has been further implemented through
the extensive lobbying power of corporations. Abraham Lincoln's
warning about "corporations enthroned" and Dwight Eisenhower's about the
"unwarranted influence by the military/industrial complex" have been fully
realized in our own time. Reported lobbying expenditures have risen annually,
to $3.5 billion in 2010. Half of the Senators and 42 percent of House members
who left Congress between 1998 and 2004 became lobbyists, as did 310 former
appointees of George W. Bush and 283 of Bill Clinton.
has focused on particular industries. Two powerful Democratic
administrations have not been able even to propose a system of "single payer"
health insurance. Meanwhile, business interests have assured that
whatever program of "universal coverage" emerges will lock in the interests of
the insurance and the pharmaceutical industries.
History has yet to sort out whether the second Iraq War
served any national objectives beyond military and industrial ones, but the
suspicion that oil interests played a critical role in the rush to battle is
enhanced by Vice President Cheney's refusal to reveal the names of the
participants in his energy transition committee. Simultaneously, the inability
to force public disclosure of those participants offers a window into how
thoroughly the energy industry controls its own agenda, destiny, and
information flow. Not only has the industry succeeded in achieving and
maintaining special regulatory and tax treatment; in multiple other ways, it
functions virtually as an independent state.
5. Capture has placed the most
powerful CEOs above the reach of the law and beyond its effective enforcement.
Extensive evidence of Wall Street's critical involvement in the financial
crisis notwithstanding, not a single senior Wall Street executive has lost his
job, and pay levels have been rigorously maintained even when, as noted
earlier, TARP payments had to be refinanced in order to remove any possible
While several financial firms have paid civil penalties
for their abuses, the amounts involved bear little relation to the malfeasance.
District Judge Jed S. Rakoff recently - and rightly - rejected the
$285-million settlement agreed to between Citigroup Inc. and the Securities and
Exchange Commission as "neither fair, nor reasonable, nor adequate, not in the
Worse, such fines as have been imposed on the financial
industry are basically being paid by the government itself. At the same time
that various regulatory agencies boast of record setting penalties assessed
against banks, the Federal Reserve pays banks interest on money that is not
being lent, resulting in an "interest margin" realized by U.S. banks in the
first six months of this year of $211 billion - more than ample funding for any
6. Capture has been perpetuated
through the removal of property "off shore," where it is neither regulated nor
taxed. The social contract between Americans and their
corporations was supposed to go roughly as follows: In exchange for limited
liability and other privileges, corporations were to be held to a set of
obligations that legitimatized the powers they were given. But modern
corporations have assumed the right to relocate to different jurisdictions,
almost at will, irrespective of where they really do business, and thus avoid
the constraints of those obligations.
As Nicholas Shaxson writes in Treasure Islands, "The privileges
have been preserved and enhanced, but the obligations have withered."
Meanwhile, the U.S. Treasury is estimated to be losing $100 billion annually
from off-shore tax abuses.
Government cannot and will not hold corporations to
account. That much is now obvious. Indeed, the dawning realization of this
truth is what has informed the Occupy movement, but only the owners of
corporations can create the accountability that will ultimately unwind the knot
of government capture.
of the problem is quite straightforward: a failed system of corporate
governance. So is the cause: the unwillingness
of trustee owners of America's corporations to assert their responsibility,
legal duty, and civic obligation to monitor and oversee the corporations
they invest in. Fiduciary institutions own 80 percent of the outstanding shares
of corporate America and thus bear at least 80 percent of the responsibility
for present circumstances as well as 80 percent of the onus for saving the
system itself. And the largest institutional investors - the Bill and Melinda
Gates Foundation, Harvard University, and others - must take the lead because
(a) they should and (b) all other courses have failed.
Urban park by urban park, campus by campus, the Occupiers
are bearing sometimes inchoate witness to America's capture by corporate
interests. Now, men and women of conscience need to reoccupy the boardrooms of
America's corporations. The boardroom is where the takeover began, and it's
where capture can finally be undone and a government of, by, and for the
people, not the corporations, restored to the land.
Read more blog posts on corporate governance at the Robert
A.G. Monks blog
more information about LexisNexis products and solutions connect with us
through our corporate site.