Dear Friend,

For twenty years and more I have been poring over all manner of information about the governance of corporations. Amidst the myriads of detail only now does there emerge a clear and simple picture - the hegemony of corporate power in our society.

This explains many seeming aberrations - why, for example, intelligent people persist in using words contrary to their accepted meanings - like talking of the "election" of directors; leaders from the most respected institutions won’t lead; and the government won’t enforce laws intended to protect millions of beneficiaries from their trustees' conflicts of interest. Hopefully, we are now experiencing the apogee of one of those cycles of selfishness which has characterized our country’s history. Otherwise, we have more to worry about the corruption of power from within than any external challenge to our nation's safety.

While I had no grand expectations about my “To Harvard with Love” [A copy is available on my web site: To Harvard With Love (pdf) ], I am saddened by Larry Summers' reply [ Summers Letter ] which I characterize as a Bureaucratic Brush-off. Society must be impoverished to the extent that owners feel free to decline responsibility for their property. Amusingly, we now read in the Boston Globe that the Harvard Business School is embarking on an ambitious study of ethics. I have respectfully asked the professor to include “To Harvard…” in the curriculum. I will not hold my breath.

No one yet has fully appreciated the consequences of dysfunction of the Securities and Exchange Commission over the last quarter century. Our own involvement was epitomized by the thirteen years effort - three Presidential Administrations - to confirm basic policy [ RTS Letter ]. Harvey Pitt answered it clearly and unmistakably. Government regulatory failure is epitomized by the Department of Labor. An egregious example is the Compaq and Hewlett Packard merger in the spring of 2002. The defective voting process that has been the subject of Delaware Court review and, in the summer of 2003, administrative censure by the SEC constitutes - a per se violation of the conflict of interest provisions of ERISA - involving the "purchase" by Hewlett Packard of votes from Deutsche Asset Management (actually its subsidiary Alex Brown). The Department of Labor was on notice before the merger vote of the conflict of interest; it has - to this date - taken no action. Hopefully, the Government Accounting Office will publish a review of this situation before spring. The message to institutional fiduciaries, however, is clear - disregard the law with impunity - and so they have for the thirty years since ERISA was enacted.

We must be grateful that the SEC raised the question of nominating independent directors. While their proposals will not solve the problem, raising the issue at all is progress. [ Katz Letter ]

I find that working with class action lawyers has provided a means through settlement of improving the governance structures of corporations and so I continue this work.

Failure of leadership by those from whom it should be expected and government entropy have created a political crisis - a crisis of power filled by large corporations - which I address [ Corporate State Report CSFI (pdf) ] in a paper published by the Centre for the Study of Financial Innovation (CSFI). I fear the "corporatist state".

Bob Monks