Robert A.G. Monks — the pioneering shareholder activist and corporate governance adviser — delivers a ruthless critique of capitalism in his new book, assailing CEO greed and institutional investor neglect.
In “Citizens DisUnited: Passive Investors, Drone CEOs, and the Corporate Capture of the American Dream,” Mr. Monks contends a “coup d'etat has been staged. The most powerful CEOs have effectively seized authority over a vast range of America's corporate resources.”
Among takeaways from Mr. Monks' perspective, “the financial power of American corporations now controls every stage of politics — executive, legislative and judicial.”
Corporations are “armed, armored and protected by the courts and Congress.”
“And to combat them, their opponents have only weaknesses, atomized shareholding, absentee owners, a farcical proxy system and on and on.”
Institutional investors have largely betrayed their fiduciary duty, Mr. Monks asserts.
“With a few rare and honorable exceptions, trustees — including universities, foundations and even the most enlightened corporations' pension funds — have deliberately declined to take steps as activist shareholders,” he writes in the 182-page book, published by Miniver Press.
Those exceptions might include public and union pension fund activists, who have pursued corporate governance reform to hold boards more accountable, better align executive pay with shareholder interests and bolster shareholder rights.
In fixing blame, Mr. Monks points in large part to the 2010 U.S. Supreme Court decision in the case of Citizens United vs. Federal Election Commission, giving corporations, as he interprets the ruling, “the legal right to use shareholder resources to their own ends.”
Mr. Monks is critical of divesting as a tool to control corporate behavior. In a surprising revelation, he writes: “Nelson Mandela once told me that he had great respect for those companies that continued to do business in apartheid South Africa,” believing “their presence kept up the pressure to reform.”
Mr. Monks might write with a command of corporate governance but some of his descriptions, such as likening ExxonMobil Corp.'s annual meeting to a Stalin-era assembly, are over the top and diminish his authority.
Overall, Mr. Monks presents a dispiriting analysis. However, he offers seeds for change, albeit radical approaches. Among reforms, he suggests “a constitutional amendment separating corporation and government, along the lines of the First Amendment separation of church and state.” In addition, he suggests a “bonus dividend” for shareholders, especially index funds, that not only hold shares for the long term but “enforce change when necessary,” having the “mettle to hold management to account.” But he notes persuading corporations to offer such a bonus would be a “steep slope.”