» » The Divine Right of Capital: Dethroning the Corporate Aristocracy

Download The Divine Right of Capital: Dethroning the Corporate Aristocracy epub

by Marjorie Kelly

Wealth inequity, corporate welfare, and industrial pollution are the symptoms of our sickened economy, Marjorie Kelly suggests. The underlying illness is shareholder primacy. In The Divine Right of Capital, she shows that the corporate drive to maximize shareholder profits at any cost is not only out of step with democratic and free-market principles, but is detrimental to the long-term health of individual companies and the economy as a whole. Kelly offers a far-reaching solution to rebuild corporations in a way that serves all.
Download The Divine Right of Capital: Dethroning the Corporate Aristocracy epub
ISBN: 1576751252
ISBN13: 978-1576751251
Category: Other
Subcategory: Social Sciences
Author: Marjorie Kelly
Language: English
Publisher: Berrett-Koehler Publishers; 1st edition (October 15, 2001)
Pages: 200 pages
ePUB size: 1954 kb
FB2 size: 1514 kb
Rating: 4.2
Votes: 921
Other Formats: lrf lrf azw lit

This is one of those great conceptual works that completely changes the way one sees the world or certain parts of it. Over and over, page after page, and chapter after chapter, new ways of seeing economic systems we take for granted are displayed with clarity and brilliance.

Although I was always suspicious of it and the reality was always there for me to see, I never put the pieces together to realize just how big a con game the stock market and "public" corporations really are.

Stop and think about it: we are told day in and day out that stocks provide capital/equity for businesses. However, this is not completely true, and certainly a long way from accurate. Granted, the initial stock sale to the public provides some capital for a company, but after that, the money for the sale of stock rests in the hands of the buyers and traders of that stock. For example, a relative of mine bought Sears stock when it was 19 cents a share (long time ago - old relative), and that 19 cents went to Sears. I just looked at Sears stock, and it is selling for around 84 dollars today. The thing is, none of that 84 dollars will go to Sears (unless it is holding some shares and is actively selling) - the traders get their commission, and the seller, whomever that might be, gets the rest (and the IRS will want its share as well).

How does that benefit Sears (besides getting them good ratings for borrowing money)? People are selling shares which originally made Sears 19 cents, and making 50 times more than Sears got for that share, and NONE of that value goes to Sears. Stockholders still expect Sears to pay dividends on that 84 dollar share, even though multiple, repeated sales of it provide no equity or cash flow to Sears at all.

If that is not a con game, I don't know what is. What other business would put up with a situation like that. Would you expect your car company to provide you with free gas and oil changes for life, even if you bought the car second, third, or forth hand? Of course not. We would think someone completely insane to even suggest an arrangement like that. So why do we do the same thing for stockholders who provide no real benefit to the company whose shares they hold?

And spare me the nonsense about "ownership." Virtually no small shareholder "owns" any palpable interest in any company for which they hold stock. Stockholders no more add value to the company than do people who own antiques add value to the original maker of a piece of furniture. (Or a collector of Barbie lunch boxes.) The stock market is a rigged casino for the elite to "mine" the wealth created by others, at the expense of others. It is a parasitic cancer.

This and much more about how upside-down our economic system is can be explored in this book. It will stimulate your thinking about what is real wealth and value, and whether wealth belongs to those who create it, or those who control/manipulate the economy.

Another notion explored is that it is labor which creates wealth/value, not capital. In fact, capital is the product of labor, not the other way around, which our Founders understood quite well. The idea that capital creates wealth is especially stupid today, when it is extremely obvious that it is knowledge and artistry which create wealth, with capital little more than grease in the gears. Should the grease monkeys keep all the profit? I think not.

Unfortunately, the book is marred from time to time with less than well thought out examples, such as SAIC. SAIC is involved in a lot of highly secret "black" government projects, and its behavior is not as open to scrutiny as one would like in an example of good corporate behavior. Also, the idea that a certain percentage of employees share greater benefits than the rest without exploring the reason for them being chosen becomes a groundless argument which does not further the author's point. it merely reinforces the whole idea of economic aristocracy and class war.

A great read, full of brilliant insight, well thought out and researched ideas. This is a must read for anyone living in today's world.
This book is a major myth buster. American culture is so wrapped up in corporate free market mythology that people like Marjorie Kelly are voices in the wilderness. But what a voice!

She is razor sharp in her disection of those things we all think we know about economics. For example, we have all been convinced that the profit of shareholders makes our world go round. In truth shareholders are basically parasites on the economic system. Only the intial sale of common stock actually benefits a corporation. The trading of millions of shares that happens each day is about speculation not the creation of real wealth. When you buy a used Ford Escort your purchase does not benefit Ford Motor Company. Likewise when you buy a share of Ford stock your purchase does not benefit Ford Motor Company. It is so simple, yet so unknown as to be mind blowing.

And that is just one of things you will learn in this book.
The central aim of "The Divine Right of Capital" is show that the structure and legal basis of the modern American corporation bears a great deal of resemblance to feudal estates of the Middle Ages. However, this situation is at odds with an era that holds democracy to be sacred. Large corporations that draw upon the ideas of an era of aristocratic privilege are contrasted with corporations organized democratically. A secondary and less successful interest of the book is to show paths that have or could be taken to bring about such a change.
The author outlines those characteristics of modern corporations that can be considered aristocratic. The aristocratic corporation adopts the legal pretense of being a non-public, private entity. Based on private property rights, a distant and ever-changing group of stockholders have the liberty and voting rights to choose the CEO, while the core constituent body of the corporation and the actual wealth producers, the employees, have no legal voice. Financial gains for the stockholders by virtue of their "ownership" position, irrespective of any real corporate functionality, are to be maximized while costs, which employees represent, are minimized. It is this "wealth privilege" that is truly reminiscent of the status of the olden feudal lord.
By contrast democratically organized corporations would be developed and viewed much differently. First, it would be acknowledged that corporations are semi-public entities with obligations for the public good and subject to control by both the community and employees. A body of distant, amorphous "owners" would not be able to disenfranchise a stable, human community of workers, that is, the employees. The aims of the corporation would reflect the primacy of employees. Payouts to stockholders would be viewed as costs to be contained with the rewards of productivity improvements accruing to employees.
Historically, however, the author notes that in the early republic corporations were chartered by state governments for fixed terms to accomplish specific functions and were subject to some government oversight with the possibility of charter revocation. But a series of court decisions established the "bizarre" notion that corporations are private entities with full rights as persons. In that construct, employees are subsumed within the corporation with only a subservient role to perform.

Turning to more recent attempts at ameliorating the primacy of shareholders, the author notes that some states have enacted legislation that obligates corporations to act in the best interests of other stakeholders including employees, customers, and the community. But much of that legislation is relatively weak and untested. In addition, voluntary corporate initiatives such as codes of conduct or enlightened management seem to be mostly reactionary with little staying power.
At this point in our economic and political history, any change in the structure of corporations would be a most difficult task.
Free market economic theory, the current rage in the U.S., holds that more or less equal entities freely interact in the economy. The fiction of corporate personhood dovetails with the theory perfectly. Corporations are just people; the non-democratic power dynamics and the privileges of corporations are neatly hidden away. But without public understanding of the aristocratic vestiges of corporations, the privileges of wealth, there will be no public clamor for change. Even the Enron debacle is likely to be viewed as simply personal criminality rather than an example of more general flawed corporate structure. The author does not delve into the public's perceptions of corporations or for that matter the media's role in manipulating those perceptions. But that may be a subject for others. "The Divine Right of Capital" certainly delineates the aristocratic nature of corporations in a democratic age.