We offer the following three very different options for addressing the problem of government capture:
A. Do Nothing
If you are not particularly disturbed by the various signs and symptoms of government capture outlined here, then you may best be served by acceptance and inaction. Do you have faith that the goals and objectives of today’s corporate leaders are in sync with your own best interests? Do you genuinely believe that America’s top CEOs are worth every penny we pay them? Are you content with the direction America is headed? Would you rather focus on getting your own piece of the American pie, on making your own way towards realizing what most Americans still like to think of as the “American Dream”? If all of these things are true then this is indeed the course for you.
B. Work Through the Existing System
If you find, on the other hand, the signs and symptoms of government capture to be deeply disturbing, then consider your options under the existing American political system. What would it take to replace a majority of existing Congressmen with fresh – but effective – new individuals? To restore independence from corporate interests among the Judiciary, to reverse, for example, the US Supreme Court on Citizens United? To elect and empower a President who is not beholden, above all others, to corporate interests? Conservatives and liberals alike bemoan the loss of such independence, and new political movements as diverse as the Tea Party and Occupy Wall Street push back against that loss. But now more than ever it is money that drives and informs our campaigns and elections, and the alignment between money and corporate interests has never been greater. Absent a serious and effective effort at reform, government capture by corporate interests truly is the American condition, and our ability to impact corporate behavior from the outside all but lost.
C. Embrace a Culture of Responsible Ownership
There is, however, a means for effecting reform from within the corporation. Political reform will still be needed, but the assertion of responsible ownership via the existing mechanisms of corporate governance offers a very powerful and still readily available alternative. Just as the citizens of a democracy are, by definition, the “owners” of their government, the shareholders of a widely held corporation are its owners, and are explicitly empowered to guide its actions.
While it may not be widely acknowledged or even understood, shareholders voting their shares at an annual corporate meeting may be in a position to assert more power and authority over the affairs of the modern world than do the citizens of a particular government, including the United States.
In this context, to counter-balance the trend towards government capture in America we must:
1. Face up to the “evil” of “domicile arbitrage” and federalize corporate law.
2. Encourage the creation of an informed, motivated and effective “ownership” core in all publicly traded companies. The majority opinion in Citizens United stated, “there is furthermore little evidence of abuse that cannot be corrected by shareholders, through the procedures of corporate democracy.” Bellotti, 435 US at 794 *
3. Require explicit public policies respecting corporate involvement in elections, referenda, lobbying and influence of the administration of public policy.
4. Fix executive pay. “If something is so obviously wrong and so potentially damaging to all concerned, why not fix it now? The solution to the compensation issue is so simple it is a wonder it has not been addressed before. Fix the incentive compensation for senior managers, particularly the CEO of large public companies, by making any stock options or grants awarded them vest only over some period of time, let us say five years, after their service in office is completed. Make such a process mandatory across the whole corporate spectrum.” **
5. Require the Boards of Directors to expedite the present work of various accounting groups to develop a universal language, including accounting for the external costs of corporate functioning, to allow managers clarity and competitive neutrality in managing their businesses in conformance to societal need.
* Bellotti – “Ultimately shareholders may decide, through the procedures of corporate democracy, whether their corporation should engage in debate on public issues. 34 Acting through their power to elect [435 U.S. 765, 795] the board of directors or to insist upon protective provisions in the corporation’s charter, shareholders normally are presumed competent to protect their own interests. In addition to intracorporate remedies, minority shareholders generally have access to the judicial remedy of a derivative suit to challenge corporate disbursements alleged to have been made for improper corporate purposes or merely to further the personal interests of management.”
** Kennedy, Allan A., The End of Shareholder Value – Corporations at the Crossroads, (Persueus, 2000) at p. 204