In earlier blogs, I have mentioned the fact that as a result of voter apathy, the voting % in democracies is in steep decline save for Australia where voting has been made mandatory and which I do not subscribe. I attribute much of this apathy to politicians ignoring the wishes of their electorates and I believe much the same can be said in the case of corporations.
In the latter case, you have officers (cabinet) that run the company, a board of directors (read Parliament) that appoint the officers and of course the shareholders (read voters) that elect the board. I guess you could even extend this analogy to say that the minions working for the corporation mirror the government's bureaucracy.
As in the case of democracies, the shareholder on paper is king. He or she has the power to replace the Board of Directors. In practice, the number of shareholders is huge and widespread in public corporations, and as a consequence, a few major shareholders can control everything despite the fact that % wise they do not hold a majority of the outstanding sahres. They do though decide the make-up of the Board and thereby decide who is hired to be the key Officers. The ordinary Shareholder, like the ordinary Voter is disregarded.
What's the result?
I am glad you asked.
Millions of dollars get syphoned off in outlandish salaries but even more in unearned bonuses. The figures are simply staggering, even in the case of companies which have failed to realize profits.
This is unadulerated greed then leads to other sinister ventures like the asset-backed paper fiasco. Money, money, money and to hell with who gets hurt.
Do you see the link?
In the case of democracies, too many politicians spend the taxpayers' money without regard. Corporations do the same thing with their shareholders' money. In both cases our way of life is adversely affected.
If Capitalism gets undermined so to does Democracy.
Solutions?
I am not sure what the total solution is but I do know that it does not involve government taking ownership positions in our companies.
Here though are some thoughts:
- First, make it mandatory that Officers and their families be precluded from holding shares in the companies they run;
- Bonuses should have a know cap and, in the oridinary course of events, only be paid when the company shows an annual profit;
- Bonuses must be submitted to the annual meeting of shareholders for their approval;
- Membership on a Board be time limited - e.g. no more than 5 years.
More on this later...
"Galagher"
