Shareholder control over large corporations is worryingly weak and the unrestrained hunt for profits is taking a toll on the environment and society. In Corpocracy, corporate lawyer, venture capitalist, and shareholder activist Robert Monks reveals how corporations abuse their power and what we the people must do to rein them in. In a clear and careful analysis, Monks outlines a plan for reconciling the competing interests of corporations and society through thoughtful shareholder activism.
Corpocracy
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...a formidable polemic …its unarguable point about unaccountable corporate power cannot be ignored." (The Financial Times, January 28, 2008)
"a facinating read" (City AM podcast www.cityam.com, Wednesday 23rd January 2008)
"...a timely new book...deserves to be read." (Pensions & Investments, Monday 21st January 2008)
From the Inside Flap
Corporations were conceived and first chartered to serve the public good — to exploit hard-to-find resources and to undertake projects individual businesspeople couldn't manage alone. But times have changed, corporate executives have taken on regal authority, and the public good has been dropped from the equation.
Modern corporations are free to maximize their wealth but owe nothing to the individuals and communities around them. They balk at government regulation and lock out shareholders while executives use inside baseball to reward themselves with massive pay packages. Today's CEOs are beholden to one thing only—profit for profit's sake—and our communities, our workforce, and our environment frequently suffer for it. While over-regulation of corporations will destroy the economy, doing nothing to change corporate behavior might well destroy everything else.
In Corpocracy, longtime corporate lawyer, venture capitalist, and shareholder activist Robert Monks reveals how corporations seized control, how they abuse their power, and what we can—and must—do to rein them in. In this clear and careful analysis, Monks outlines a plan for reconciling the competing interests of corporations and society through thoughtful shareholder activism that protects the interests of corporations and everyone else.
Shareholder control over large corporations is as weak as it has ever been. Not only are corporations rarely held to account by government regulation, they face even less control by those whose interests they ostensibly serve. Yet, when engaged and active, shareholders still hold the power to influence corporate behavior and governance in ways that can benefit everyone.
Corporate capitalism is still the best chance for mankind to improve life on earth. But corporations must be made to operate within the rules of legitimate authority without retarding their ability to create wealth. It's up to us to find a path that reins in corporations without stifling their ability to innovate and profit. Corpocracy is the map that will guide us to better corporations and a better world for us all.
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More About the Author
Pioneering shareholder activist and corporate governance adviser, Robert AG Monks, has written numerous books and articles about corporate impact on society and how improved governance enhances the societal and corporate value. He is the author of Corporate Governance (with Nell Minow), Watching the Watchers, The New Global Investors and Corpocracy. Bob Monks is an expert on retirement and pension plans, and was appointed director of the United States Synthetic Fuels Corporation by President Reagan who also appointed him one of the founding Trustees of the Federal Employees' Retirement System. He served in the Department of Labor as Administrator of the Office of Pension and Welfare Benefit Programs having jurisdiction over the entire U.S. pension system. And, he was a founder of Institutional Shareholder Services, Lens Governance Advisers and The Corporate Library. His website is www.ragm.com.
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9 of 9 people found the following review helpful
Format:Hardcover
Corpocracy is an ugly word, not just because of its mixed roots, but because of the governance situation in the United States which it has been coined to describe. In this compelling book, Bob Monks has summarised the means by which American business interests have conspired to suborn the state. No-one else has his authority or breadth of experience in this field of corporate governance. A corporate lawyer and banker by calling, he headed the division in charge of ERISA in the political field and he helped launch Institutional Shareholder Services and LENS to prove that active investors create value. He has distilled his remarkable range of experience into a brief and highly readable polemic. In doing so, he argues that the balance of power between corporations, those who own their shares and those charged with regulating their conduct has to be redressed.
It might, at first sight, seem that the situation which he analyses so penetratingly is peculiar to the United States and that the wider world need not actively concern itself with the author's message. This would be to underestimate the importance of this book. The lessons to be drawn from the consequences of the rise of the political power of American business, which it chronicles, are universal. In addition, given the global reach of American corporations, the need to restore their accountability to their investors within an effective regulatory framework has global implications.
Corpocracy is not a lament, though it describes much that is lamentable. It is a sober and arresting account of the manner in which the author's personal efforts to persuade the appropriate authorities, regulators and major investing institutions to do their duty, morally and juridically, has met with little effective response. The book's impact is all the greater for the restrained manner in which Bob Monks describes how those appointed to discharge their statutory and fiduciary duties repeatedly failed to do so. Inaction by the gatekeepers, left the field open to the untrammelled rapacity of imperial CEOs.
The balance of power between boards and CEOs in the United States remains a paradox, given the country's regulatory history of preventing accretions of power in relation to trusts and to banking. Nowhere else would it be possible to elect a director on a single vote, nowhere else could shareholder votes be invalidated by "ballot stuffing", nowhere else are shareholders so limited in their ability to raise issues at AGMs, which some directors may not even bother to attend. The prevailing concept of CEO/chairmen selecting their outside board members, thus compromising their independence, strengthens the hand of the CEO at the expense of that of the board.
The response to this imbalance in governance terms is the financial track record of US corporations, but at whose expense has it been achieved? Bob Monks' answer is:
"History will look back on the 1990s and early 2000s as a time when the principal officers of public American corporations transferred from shareholders to themselves approximately $1 trillion - or 10 percent of the market value of public exchanges. This must be the largest peacetime movement of wealth ever recorded, and it was accomplished through stealth that amounted to theft and in a spirit of regulatory permissiveness that certainly rises near to the level of criminal neglect." In addition, there is the extra 5 percent of profitability that the Corporate Library metric tells us is lost through bad practice, plus the opportunity cost of boards focusing on short term personal aggrandisement at the expense of sustainable profitable growth. As the one member of the SEC, who opposed the Committee's recent decision to limit the ability of shareholders to put forward resolutions, said: "Corporate governance in the United States is not well served by inattentive boards that are effectively unaccountable to shareholders."
Inevitably one of the headline manifestations of this lack of accountability has been the grossness of the rewards, which some of these principal officers have arrogated to themselves, for failure as well as success. There are attempts to justify these excesses by analogy with the earnings of stars of sport, stage and screen or by claiming that they are market determined. The analogy with the stars is manifestly spurious. The stars earn what their individual talent commands in the hotly contested market for entertainment. The profits of a corporation are earned collectively and represent the sum of the efforts of everyone in an enterprise. The issue therefore is how they should be distributed in a form that would be generally perceived to be fair and in accordance with the concept of natural justice.
A corporation's pay structure should meet the test of equity, rewarding those working for it, from top to bottom, in relation to their contribution to its performance. Ignoring equity in rewards sows the seeds of social division and dissension with its longer term consequences. What seems to have set the bounds to the multiple by which the earnings of the principal officers of companies exceed those of the average employee in most countries is a sense of social cohesion. The multiple varies by country and through time, but it represents a social constraint or discipline, which carries with it economic advantages not to be ignored.
The fact that shareholders are outraged by the grosser excesses of the pay packages of the principal officers of some corporations is no more than a symptom of the lack of accountability of US boards to those who own their stock, hence the theme of the book. It is a cause which Bob Monks has espoused and pursued with a determination and energy that is wholly admirable and selfless. In spite of setbacks, he believes that this essential accountability can be restored. He sees no cause for new laws, agencies or fiscal measures, though the existing statutory and regulatory framework should be effectively enforced. He argues that it is the major investing institutions that carry the obligation to themselves and to society to restore trust in the capitalistic system.
They have the power to reform the governance of corporations and they have a straightforward economic incentive to do so. The obligation, however, of the great foundations, among the investing institutions, to play their part in bringing about reform goes beyond the calculus of financial gain. It lies at the heart of their creation. They directly assist their chosen causes, but that is within the wider context of a market system which provides them with the ability to do this. They have a responsibility to maintain the means by which they fulfil the aims for which they were founded.
The book's message is therefore optimistic, provided that it is heeded in time. Trust and accountability can be restored, but it will take courage and above all leadership to do so. What is needed is enlightened leadership by those in a position to exercise it in the investing institutions and in corporations themselves. In Bob Monks' words:
"It demands that those with a majority stake in the corpocracy - its principal owners and beneficiaries - lead the way back to the broad light of day. The hour is late. The sun won't always be waiting."
Read Corpocracy and judge for yourself!
It might, at first sight, seem that the situation which he analyses so penetratingly is peculiar to the United States and that the wider world need not actively concern itself with the author's message. This would be to underestimate the importance of this book. The lessons to be drawn from the consequences of the rise of the political power of American business, which it chronicles, are universal. In addition, given the global reach of American corporations, the need to restore their accountability to their investors within an effective regulatory framework has global implications.
Corpocracy is not a lament, though it describes much that is lamentable. It is a sober and arresting account of the manner in which the author's personal efforts to persuade the appropriate authorities, regulators and major investing institutions to do their duty, morally and juridically, has met with little effective response. The book's impact is all the greater for the restrained manner in which Bob Monks describes how those appointed to discharge their statutory and fiduciary duties repeatedly failed to do so. Inaction by the gatekeepers, left the field open to the untrammelled rapacity of imperial CEOs.
The balance of power between boards and CEOs in the United States remains a paradox, given the country's regulatory history of preventing accretions of power in relation to trusts and to banking. Nowhere else would it be possible to elect a director on a single vote, nowhere else could shareholder votes be invalidated by "ballot stuffing", nowhere else are shareholders so limited in their ability to raise issues at AGMs, which some directors may not even bother to attend. The prevailing concept of CEO/chairmen selecting their outside board members, thus compromising their independence, strengthens the hand of the CEO at the expense of that of the board.
The response to this imbalance in governance terms is the financial track record of US corporations, but at whose expense has it been achieved? Bob Monks' answer is:
"History will look back on the 1990s and early 2000s as a time when the principal officers of public American corporations transferred from shareholders to themselves approximately $1 trillion - or 10 percent of the market value of public exchanges. This must be the largest peacetime movement of wealth ever recorded, and it was accomplished through stealth that amounted to theft and in a spirit of regulatory permissiveness that certainly rises near to the level of criminal neglect." In addition, there is the extra 5 percent of profitability that the Corporate Library metric tells us is lost through bad practice, plus the opportunity cost of boards focusing on short term personal aggrandisement at the expense of sustainable profitable growth. As the one member of the SEC, who opposed the Committee's recent decision to limit the ability of shareholders to put forward resolutions, said: "Corporate governance in the United States is not well served by inattentive boards that are effectively unaccountable to shareholders."
Inevitably one of the headline manifestations of this lack of accountability has been the grossness of the rewards, which some of these principal officers have arrogated to themselves, for failure as well as success. There are attempts to justify these excesses by analogy with the earnings of stars of sport, stage and screen or by claiming that they are market determined. The analogy with the stars is manifestly spurious. The stars earn what their individual talent commands in the hotly contested market for entertainment. The profits of a corporation are earned collectively and represent the sum of the efforts of everyone in an enterprise. The issue therefore is how they should be distributed in a form that would be generally perceived to be fair and in accordance with the concept of natural justice.
A corporation's pay structure should meet the test of equity, rewarding those working for it, from top to bottom, in relation to their contribution to its performance. Ignoring equity in rewards sows the seeds of social division and dissension with its longer term consequences. What seems to have set the bounds to the multiple by which the earnings of the principal officers of companies exceed those of the average employee in most countries is a sense of social cohesion. The multiple varies by country and through time, but it represents a social constraint or discipline, which carries with it economic advantages not to be ignored.
The fact that shareholders are outraged by the grosser excesses of the pay packages of the principal officers of some corporations is no more than a symptom of the lack of accountability of US boards to those who own their stock, hence the theme of the book. It is a cause which Bob Monks has espoused and pursued with a determination and energy that is wholly admirable and selfless. In spite of setbacks, he believes that this essential accountability can be restored. He sees no cause for new laws, agencies or fiscal measures, though the existing statutory and regulatory framework should be effectively enforced. He argues that it is the major investing institutions that carry the obligation to themselves and to society to restore trust in the capitalistic system.
They have the power to reform the governance of corporations and they have a straightforward economic incentive to do so. The obligation, however, of the great foundations, among the investing institutions, to play their part in bringing about reform goes beyond the calculus of financial gain. It lies at the heart of their creation. They directly assist their chosen causes, but that is within the wider context of a market system which provides them with the ability to do this. They have a responsibility to maintain the means by which they fulfil the aims for which they were founded.
The book's message is therefore optimistic, provided that it is heeded in time. Trust and accountability can be restored, but it will take courage and above all leadership to do so. What is needed is enlightened leadership by those in a position to exercise it in the investing institutions and in corporations themselves. In Bob Monks' words:
"It demands that those with a majority stake in the corpocracy - its principal owners and beneficiaries - lead the way back to the broad light of day. The hour is late. The sun won't always be waiting."
Read Corpocracy and judge for yourself!
4 of 4 people found the following review helpful
Format:Hardcover
Robert Monks begins by informing readers that he is a strong supporter of for-profit corporate enterprise. He then goes on to recite how the leaders of these enterprises have recently run amok in the U.S.
"Efficiency," without regard for externalities (eg. pollution, off-shoring American jobs), using "GWAP" reporting (Gee, Whatever Accounting Principles), surrounded by board member, accounting firm, pay, board-evaluation consultant, and stock analyst conflicts of interest, fortified by think-tanks funded by corporations, and beyond accountability via ending the "one share, one vote" rule - their top leaders enjoy scandalous pay and retirement packages, without regard to organizational performance.
At they same time today's corporations are expanding their realms by privatizing government roads, health care, and warfare functions, in the supposed name of efficiency - while actually usually costing more, providing lower service levels, and/or even less accountability. (Helping vitiate a key Democrat-party base of government workers, and gaining increased lobbying influence are additional benefits.) Other government "benefits" today's organizations enjoy include toothless law and regulation enforcement (eg. SEC, DOL), and the ability to shed expensive pension obligations through bankruptcy or simply walking away.
Monks sees pension funds as having a key role in taming today's out of control corporations. Specifically, he touts Hermes Investment Management Company (a London pension fund for phone workers) as an example of what could be done. Monks also praises Elliott Spitzer for accomplishing far more than the SEC or DOL with fewer staff, CEOs Gary Immelt of G.E. and Frank Blake of Home Depot (replaced Robert Nardelli) as examples of principled leaders.
One final comment: Late in his book Monks almost off-handedly remarks that 10% of market value ($1 trillion) was transferred from investors to corporate principal offers. He also asserts that about 95% of all stock options go to the top 15 or so officers. I don't for a moment question his conclusions - Monks' reputation is quite solid. However, I do wish he spent more time elaborating and emphasizing these points.
"Efficiency," without regard for externalities (eg. pollution, off-shoring American jobs), using "GWAP" reporting (Gee, Whatever Accounting Principles), surrounded by board member, accounting firm, pay, board-evaluation consultant, and stock analyst conflicts of interest, fortified by think-tanks funded by corporations, and beyond accountability via ending the "one share, one vote" rule - their top leaders enjoy scandalous pay and retirement packages, without regard to organizational performance.
At they same time today's corporations are expanding their realms by privatizing government roads, health care, and warfare functions, in the supposed name of efficiency - while actually usually costing more, providing lower service levels, and/or even less accountability. (Helping vitiate a key Democrat-party base of government workers, and gaining increased lobbying influence are additional benefits.) Other government "benefits" today's organizations enjoy include toothless law and regulation enforcement (eg. SEC, DOL), and the ability to shed expensive pension obligations through bankruptcy or simply walking away.
Monks sees pension funds as having a key role in taming today's out of control corporations. Specifically, he touts Hermes Investment Management Company (a London pension fund for phone workers) as an example of what could be done. Monks also praises Elliott Spitzer for accomplishing far more than the SEC or DOL with fewer staff, CEOs Gary Immelt of G.E. and Frank Blake of Home Depot (replaced Robert Nardelli) as examples of principled leaders.
One final comment: Late in his book Monks almost off-handedly remarks that 10% of market value ($1 trillion) was transferred from investors to corporate principal offers. He also asserts that about 95% of all stock options go to the top 15 or so officers. I don't for a moment question his conclusions - Monks' reputation is quite solid. However, I do wish he spent more time elaborating and emphasizing these points.
6 of 7 people found the following review helpful
By Nell Minow
Format:Hardcover
Robert Monks is a true visionary, and this assessment of corporate control of every institution set up to provide oversight or assure accountability will provoke a series of "aha" moments from anyone who has wondered why we permit corporations to determine everything from pollution levels to the outcome of elections. With mastery of the languages of finance, economics, business, politics, culture, and values (in all senses of the word), Monks ties together the Babel of vocabularies with analysis that is utterly clear-eyed and recommendations that are creative but utterly rational.
Most Recent Customer Reviews
5.0 out of 5 stars
A must read
What Sir Adrian Cadbury and others have written on the importance of this book, its incisiveness and the impact of the issue cannot be stressed enough. Read more
Published 19 months ago by Scott S. Lichtenstein
4.0 out of 5 stars
A great book for all shareholders
The author has given a great expose' on the problems of abuse that exist in corporate America. The expectation that corporate boards are serving as a watch dog in their duties is... Read more
Published on May 28, 2008 by Dwight L. Short
5.0 out of 5 stars
Delights and Informs
Corpocracy both delights and informs in a way only Bob Monks can. His lifework has been delineating the underlying dynamics of corporate power to devise a system that combines... Read more
Published on April 1, 2008 by James Mcritchie
5.0 out of 5 stars
Captain Ahab Pursues the Great White Whale of Corpocracy
When, on some future date, the Mount Rushmore of Corporate Governance is carved into some mountainside, Bob Monks' profile should be chiseled into the stoneface in a position... Read more
Published on December 26, 2007 by John C. Coffee
Front Cover | Front Flap | Table of Contents | First Pages | Index | Back Flap | Back Cover | Surprise Me!
