"He's a snake in the grass, I tell ya guys; he may look dumb but that's just a disguise; he's a mastermind in the ways of espionage." Charlie Daniels, "Uneasy Rider" Leading Republican corporate governance expert throws in towel on shareholder oversight of listed companies, decries unaccountable CEOs, excessive corporate power and Government Capture - TT's Lost in Tokyo

Leading Republican corporate governance expert throws in towel on shareholder oversight of listed companies, decries unaccountable CEOs, excessive corporate power and Government Capture

Robert A.G. Monks is another well-known Republican now railing at runaway crony capitalism and its related corruption of government.  I have referred to Monks twice previously:

More by Bob Monks on the shareholder marginalization at the core of the crisis of public corporation capitalism

WSJ: Governance guru Robert A.G. Monks blames investors for crisis (but both he and WSJ miss that irresponsible, ineffective shareholders is a consequence of limited liability and "public co" regulation)

Before embarking on a 40-year crusade as a corporate governance consultant, Monks had an extensive history in business and government. He was once the Republican candidate for Senate from Maine and corporate governance adviser in the film "The Corporation". According to Wikipedia, "Monks has written widely about corporate governance and has published more than a hundred papers in publications around the world.He was the recipient of the Award for Outstanding Financial Executive from the Financial Management Association in 2007. Monks is the subject of a biography chronicling the corporate governance movement, A Traitor to His Class by Hilary Rosenberg.

Bob Monks' 30-Year Crusade", 2003), "In the early 1980s, Monks established Institutional Shareholder Services, a leading corporate governance consulting firm, and, in the early 1990s, he opened Lens Asset Management, a fund that used shareholder activism to shake up underperforming companies. But today — in the aftermath of Enron, the corporate profligacy of Tyco International management and the like — Robert A. G. Monks appears to be a man for the moment. Monks, author of the book The New Global Investors, argues that shareholders, especially large institutional investors, have become passive, essentially abandoning their responsibility of overseeing the behavior of executives who are charged to serve them, and, Monks argues, the common good."

Monks' books include:

  • Power & Accountability. HarperCollins, 1991. (with Nell Minow)
  • Watching the Watchers. Capstone, 1996. (with Nell Minow)
  • The Emperor’s Nightingale. Saint Simons Island, Georgia: Brook Street, 1999.
  • The New Global Investors. Capstone, 2001.
  • Capitalism Without Owners Will Fail: A Policymaker’s Guide to Reform. London: CSFI, 2002. (with Allen Sykes)
  • Reel and Rout. Saint Simons Island, Georgia: Brook Street, 2004.
  • Corpocracy. New York; Wiley, 2007.
  • Corporate Valuation for Portfolio Investment. London: Wiley, 2010. (with Alexandra Lajoux)
  • Corporate Governance (5th Revised Edition). London: Wiley, 2011. (with Nell Minow)

His blog is here. Below I cross-post in full , with his approval, Bob Monk's October 31, 2011 post, together with the comment I left in response at his blog (emphasis added)

Corporate Power & Government Capture

Failure of CG has led to capture
For the past thirty years I have focused my energies on corporate governance and the legitimacy of corporate power.  And by legitimate, I mean that the people who exercise power for the corporations need to be accountable to somebody.  Over the years, it has become clear that they really are not accountable to anybody, and our experiment in self-regulation and minimal oversight has failed.  In practice, this has meant that a small group of individual CEOs exercise power over financing elections and lobbying the passage and enforcement of laws.
Where are we now?
The failure of owners to be involved in overseeing the corporations they own and the failure of government to enforce rules already on the books has led to what is known as capture.  Capture means, to me, the power to allocate the resources of government, in this case the U.S. federal government.  We’ve seen this in the bailout, in tax leniency and in subsidies.  We’ve seen it in deregulation and the failure to enforce regulations that already exist.   
Capture is a very predictable and logical outcome of our failures.  All the corporate governance efforts I’ve been involved with have stressed the internal accountability of those with power in a corporation.  And one of the essential elements of accountability that are critical for long term credibility of sustainable corporations is that they be subject to a governing law, and that they comply with law in a full way and not in a grudging way. 
So this is about corporate power – excessive corporate power.  The balance of power is not only tipped but so out of skew that we’ve come to accept it as normal.  We excuse it by saying that corporations need to be competitive or that they create jobs.  We excuse it by saying that CEOs take risks and therefore need outsized salaries to compensate for that.  But while some of that may true, corporations also take a lot from our society:  educated workforce, roads, subsidies, roads, military protection, diplomatic work done by our government and more.  Furthermore, they don’t take responsibility for the by-products or off-products of their work:  pollution, health issues, wear and tear on the infrastructure paid for by citizens.  Society is a give-and-take proposition but for now, the powerful take much more than they contribute and that is not sustainable. 
For me, corporate governance has failed and it’s time to move on.  These larger issues are where I see the discussion going so I’ll be writing more on this topic in the weeks to come.  Please comment or send me your thoughts.  There’s so much to talk about and I look forward to hearing what you think.

I left the following comment in response at Bob's blog (emphasis added):


Posted by TokyoTom on Nov 3, 2011 at 12:32 PM
Bob, the answer is simple:

-- Let shareholders of publicly-listed firms alone to figure out how to protect their own interests, and

-- Let better managed firms that don't tap public markets (and thus who have smaller numbers of more sophisticated investors who don't need the dubious 'protections' of Government) to eat the lunches of the bigger, more bureaucratic and less profitable public firms.

In other words, the existing system can't be saved, and it is not worth the effort.
What we need is a whole lot more of Schumpeter's 'Creative Destruction', which we can expect from private firms -- which have been growing as Sarbanes-Oxley has helped large firms build barriers by walling off access to capital markets.

One action item that I still see as necessary is to encourage the use of alternative corporate/organization forms where shareholders/owners retain a significant tail of risk. Since it is the moral hazard and risk-shifting made possible by state-granted limited liability status that has also fuelled the growth of the regulatory state, states can also experiment with dramatically lowering regulations for smaller local firms where shareholders have unlimited liability or must pony up additional capital to pay damages for any torts.


Published Sun, Dec 11 2011 1:06 AM by TokyoTom


# Limited Liability, Redux: As Bob Monks says, "corporate governance has failed and it’s time to move on." So what's next? Unleash the Hounds!

Saturday, December 10, 2011 10:42 AM by TT's Lost in Tokyo

This is a precis of my preceding post . As I noted, veteran shareholder activist Robert A.G. Monks has