Thursday, June 30, 2011

The Appearance of Reality: A Conclusion

I have been thinking of a way to conclude the recent series of questions about corporate governance concepts on this blog and to me, this quote sums it up nicely:
“Our corporate statutes assume that shareholders own the corporation, that the rights and powers of shareholders flow from their providing “risk capital,” that directors shall manage the business and that officers are agents of the corporation under the direction and control of the board, with a duty to manage the corporation for the benefit of all shareholders. None of these claims are true.”( Flynn, John J., Corporate Democracy, Nice work if you can get it, at p. 94, 96 quoting Bayless Manning).
And so what are we left with? As far as I can see, we have a system that works well from the perspective of those who have the power to change it -- CEOs, self-perpetuating boards and other beneficiaries of the “club” – and all they gain is at the expense of seemingly powerless owners.
The indicators of continued corporate dysfunction:
·         Self-compensation of executives
·         Neither accountability nor liability of directors
·         No effective enforcement of existing laws by government and continuing effective obstruction of enforcement through private litigation
At the end of the day it is quite simple: as simple as a superseding federal law that allows five % of the shareholders of a corporation to call a special meeting at which a majority acting may remove any or all of the directors with or without cause. But there is no such law and as long as there is no such law American shareholders will continue to be without meaningful rights and American corporations will lack the quality of accountability that makes their power legitimate in a democratic society.
What do you think?
June 30, 2011 in Disinformation  |  3 comments  | 

Post a comment


Posted by @RA_Whipple on Jul 1, 2011 at 10:39 AM
The great failure in the decision to fail establishing a public relations(hip) vocation as being accountable to a professional's licensing (and regulatory) board is that strategists who are otherwise very familiar with the client/company have little power but to manage perception for the CEO rather than effect its reality for shareholder/stakeholder value.
Posted by Michael Solomon on Jul 1, 2011 at 9:50 AM
Bob, thanks for the post.

John Flynn's quote made me laugh despite the tragic nature of the statement.

I remember the first time we met very well: 2 December 2004 at 47 Park Street, London. I remember a lively and stimulating discussion. I remember at one stage waving my arms towards the windows of the suite and saying that the lever is out there, that it is people power that will ultimately provide the necessary carrots and sticks to drive real change.

I stand by that:

Businesses that are genuinely responsible will (one day soon) prove it.

With best regards
Posted by Michael de Tocqueville on Jul 1, 2011 at 7:00 AM
As an Australian investor not being familiar with U.S.A federal and state law.

Australian corporate law allows100 shareholders as petitioners or shareholders alone or group of shareholders holding 5% or more of a listed companies equity, to call meetings and put up resolutions. I believe the same applies to UK and New Zealand shareholders etc, etc.

Why the US disparity?

Given the difficulty confronting US shareholders just getting resolutions up, would it be naive to suggest an organisation such as, and other like minded groups, should be lobbying, petitioning the law makers loudly, to introduce the necessary legislation!
Copyright 2022 by Robert A. G. Monks