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Robert
A.G. Monks February 21, 2003
Mr. Bill
Emmott Dear Bill, I am moved to write about 20:21 Vision in the spirit that one cannot blame Columbus because he wasn’t Magellan. I find myself wanting to hear more from you about the legitimacy of corporations. I have struggled to find any other word as it exudes an unfortunate sense of legalism. Unhappily, there is no other word that communicates precisely my interest in how the power of unelected corporate officials can be tuned to the needs of society. Charles Lindbloom concluded some years ago: “The large corporation fits oddly in the democratic theory and vision. Indeed, it does not fit.” The situation in the United States today might be described as a corpocracy, if there were any such word (and there should be. The nearest equivalent in Webster’s is corporatist which sounds too much like Mussolini). Friedman has famously written that the entire purpose of corporations is to maximize profits within the rules. I regret never having taken the opportunity to ask him how he feels when it is unmistakable that the corporations make the rules. You may have noted the post election references by journalists of the drug industry contemplating openly exactly how much booty they can extract from Congressional victories. Legislation relating to automobile emissions and safety standards are notoriously industry friendly when compared with the levels prevailing in Europe. Beyond this is the role of the press which profits hugely from its power over elections which then reinforces its monopoly position in areas such as TV franchises and access to the ether net. And then there are campaign contributions and lobbying costs. History cannot interpret the impact of Enron with greater lucidity than you have (p. 205), but I wonder if a bit more paranoia might not be appropriate. You have the note I sent to my Senator Olympia Snowe asking her to vote against confirmation of Treasury Secretary Snow, largely because his own compensation was arguably the single most egregious example of pay without performance in a time when there was much competition for that distinction. The entire system seems to be informed by the ultimate value of a narrowly defined bottom line. The public good does not appear to be a factor in the equation. As you well point out (p. 272-274) a healthy equity culture is essential for the generation of wealth, howsoever that wealth may be distributed through political process. Whether there is money available over the next half century for private wants and public needs (retirement income) is a function of whether funds can be compounded at the traditional equity rate of return of 6% or at the bond rate of 2% (both numbers are after taking inflation into account). We must be skeptical that a corporate system can remain healthy over a long period of time without sensitivity to the sovereignty of power derived from popular vote. I know of only one American book addressing the legitimacy of the business corporation – a small volume by the late Professor James Willard Hurst, who as a law school graduate was a clerk to Justice Brandeis, perhaps the most articulate American on the subject of corporate power. Hurst talks of the various mechanisms society adduces to control corporate power from without and concludes that corporations inevitably avoid these efforts, largely because of their access to the best professional talent. Control from within the corporate structure is fantasized as being the province of the board of directors. While this would be convenient, it simply is untrue. We need look further. I sometimes think that with Myners and real government commitment to the Institutional Shareholder Committee November 2002 manifesto, you may have it right it the UK. We have no such prospects here, as the only workable solution would require amendment of our Constitution so to have explicit accommodation of corporate power within the political system. It is hard to imagine this happening. Thank you for such a stimulating experience in reading your book. Your friend, Bob |