HARVARD DIVINITY SCHOOL - 2930

MONEY, MEDIA AND MORALITY: INVESTING in the CIVIC GOOD

April 21, 1997

Taming the Corporate Tiger and A distant Thunder: Policy Pronouncements and Civic Morality

LECTURE: "The 'They' is "US': Toward a Responsible Theory of Corporate Ownership and Control"

1. What is a Corporation? · Artificial person / creature of law - Bank of Boston v. Bellotti · Best competitive system that has been devised to harness money, labor and management to produce goods, services, employment and profits · A system of power · "nice railway train" - futile to appeal to human sensitivities · need to get access to fuel and controls · Compatibility with a free society - Lindbloom - No.

2. The Dynamics of Profit Maximization · What is "profit · Optimization vs. Maximization - Drucker · Generally Accepted Accounting Principles ("GAAP") · Market Value · Experts' Evaluation - the fallibility of expert witnesses. Co-optation by $. Fairness opinions · Innate characteristics · Externalization of liabilities · Co-optation of boundary and rule setters n influence on government at all stages of law making and enforcement; n lobbying power n influence with independent rule setters. The problem of FASB with option accounting.

3. Conventional Theories of Control of Corporate Power · the "legal" mode - "independent directors" from a self perpetuating electorate · the CEO as "philosopher king" - "trust me" · Professional auditors · the myth that control does exist is not useful

4. Systemic Control of Corporate Power · Traditional theory of shareholder control - James W. Hurst · 1,000,000 owners = 0 owners. Berle & Means · Unintended reagglommeration of ownership in the 1970s-80s - conversation with J. Javitts. · Ownership Agenda shaped by "hostile takeovers" · "greenmail" - Texaco, Unruh and the CII · conflict between ownership and management unignorable · DOL - requirement of institutional voting · ISS, USA and IRRC

· Institutional Shareholders as the world wide force of the twenty first century - Brancato materials · The "Federal Law of Ownership"

5. Fiduciary Capitalism · Transparency = legitimacy · Trustee standards = ethical norms? · Management's Need for Unambiguous Goals - McKinsey Institute - '96. · Languages of Accountability · Changing the definition of "profit"

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