A few years ago — around the time of the 2010 Citizens United decision — I was thinking about "corporate citizenship" and corporate "speech."  These ideas don't make sense to me.  Corporations are a legal construct — something made by humans — and yet we've given them human rights, as it were. 

Then I started to compare human behavior to corporate behavior.  Though I'm no expert in human behavior, I'm pretty knowledgeable about corporate behavior.  Corporate behavior is determined by the goal of profit maximization while it seems to me that human behavior is unlimited and dependent upon experience and situation.  Humans have feelings and desires.  Corporations do not.  With these thoughts in mind, I began to make lists of typical behaviors in regards to ethics, accountability and modes of functioning.

I find myself coming back to these lists often — they may not be perfect indicators of all human behavior but they seem pretty solid regarding corporations.  These "corporate citizens" we've created underlie so much of my current thinking.  Who are they speaking for when they speak?  Who benefits when they lobbying government?  Who is helped when they contribute to political campaigns? And most importantly — if they are citizens in their own right, then to whom are corporations accountable?

The moment I emerged from my mother's womb, however, my possibilities dwarfed those of my siblings, for I was a boy! And my brainy, personable, and good-looking siblings were not….So my floor became my sisters' ceiling — and nobody thought much about ripping up that pattern until a few decades ago. Now, thank heavens, the structural barriers for women are falling.  — Warren Buffett

I recently read this interesting and thoughtful essay on women and the glass ceiling from Warren Buffett. Every year we see articles about how men still far outnumber women in the boardroom. And every few years a short list women are singled out as the as the ones who've overcome the obstacles and made it to the top. Their every move — from job performance to child rearing — is scrutinized so we can see if women can really handle the top corporate jobs. I think they've shown that they can but in many ways female CEOs have been disappointing.

So far, women have seemed to act as surrogate men. There has been little "female energy" in corporations though there are female people heading some of these companies. Where is the change in attitudes that were supposed to come with female leadership? I believe it'll come but it's been slow. So, let me ask this question: when we hire a woman as CEO do we want exactly the same thing as when we hire a man? Do we want them to behave in the same ways and follow the same leadership patterns established by centuries of men? Or, do want a different sensibility or style? I suppose the larger question is really whether women and men are inherently different in leadereship styles.

I don't have an answer — but maybe you do?

• In 2005 I worked and testified in support of LD 1495 in the Maine Legislature: An Act To limit the political speech of corporations. It was defeated then and again when a similar bill was proposed two years later. What a difference a few years make – because the Maine Legislature recently supported the resolution to overturn Citizens United. These things never happen quickly or easily so I’m happy to see opinion change on this issue in my home state.

• Others are marking this date, as well. Move to Amend has named this a Day of Action Against Corporate Personhood and offers resources for anyone wanting to plan or host an event. Check their listings for events in your community.
  

   

Years ago I founded a small research company called The Corporate Library in Portland, Maine.  The idea was to rate companies based on governance with the premise that good governance increases value.  Today, TCL is GMIRatings a leading risk metrics company with staff in Maine, New York and London.  I'm proud to say that we've advanced our theory that governance enhances value and expanded on that to provide reliable ESG research along with governance and accounting ratings for over 18,000 companies.

Here, Ric Marshall, Chief Analyst, explains GMI's approach to quantifying "what is typically considered to be qualitative."  Last October he was interviewed at the FSInsight in Amsterdam on GMI methodology.  He gives a thoughtful and understandable explanation of what GMI does and how they assess data.

corpgov.net has grown into a first-class resource for shareholder activism and corporate governance.  It's a must-go-to site every day.  Jim has given me unwaivering support over the years and this is my chance to encourage you all to look at his site.  I'm very pleased he has offered a thorough and thoughtful review of Citizens DisUnited.  Have a look. Thanks Jim!

Jeff Clements has been working on issues around the Citizens United case since the Supreme Court re-heard the case in 2009.  At the time he submitted an Amicus brief to the Court arguing against expanding corporate rights.  Since then he has co-founded Free Speech for People and most recently has written Corporations Are Not People.  If you're reading this blog and not following his work — well, I just can't account for it. 

I often say, that because I have spent my life working on issue of corporate governance, that is where I find solutions to the problems like Citizens United.  But that is not to say governance is the only solution.  Efforts like Clements work in bringing about a constitutional amendment to overturn Citizens United are crucial.  And, I think that we need all hands on deck working toward multiple solutions.  So, I'm very pleased that he paused to read and review my book — and shared it with his readers.

Last month, Lance Lindblom was awarded Common Cause New York's Democracy In Action award.  He's one of the few true leaders in responsible ownership.  In 2012 he retired after more than a decade at the Nathan Cummings Foundation.  Before that, while at the Ford Foundation, he focused on democratic accountability and economic and social policy.  He was one of the few people in the foundation world that I can point to as a leader who really worked to make foundations be responsible owners.  Thank you, Lance.

Revolving door influence.  From the New York Times: "The consulting firm is filled with so many former bureaucrats and political insiders that it has become known as Wall Street’s shadow regulator. Nearly two-thirds of its roughly 170 senior executives worked at agencies that oversee the financial industry. "

It's long been a dirty secret in the university world that they don't necessarily practice what they preach.  Prestigious (and expensive) universities that teach governance and ethics don't necessarily use the principles they teach when investing for endowments. The same is true for environmental issues — a hot topic on campus for several years now.  As Michael McDonald reported in Bloomberg yesterday, "While universities lead when it comes to comprehending climate change, teaching and researching how man-made carbon dioxide emissions result in rising temperatures, endowments until now have been largely off-limits."  Investment officers don't want restrictions on the portfolios because they want success — one could say, at any cost. 

There is a movement afoot, however, that could prove interesting.  Students are pushing at over 300 universities to divest in "of investments in 200 publicly traded companies with the largest reserves of oil, gas and coal."  

Could this translate into more pressure on endowment officers to be responsible shareholders all around?  We'll see but this is worth watching.

As reported in the NYT today: "Ever since Congress included a 2.3 percent tax on medical devices in President Obama’s health care reform law in 2009, there has been a forceful and well-financed campaign to repeal the tax — waged, naturally, by the medical device industry. It has donated generously to lawmakers and candidates, taken them on tours of their plants and spent tens of millions in lobbying"

By John Plender for the Financial Times – a review of Firm Commitment: Why the corporation is failing us and how to restore trust in it by Colin Mayer.

It would not be difficult to reach agreement on the proposition that the regulatory response to the financial crisis has been inadequate. Few, on the other hand, would go as far as Colin Mayer, Professor of Management Studies at Oxford’s Saïd Business School, in suggesting that it is wrong-headed from top to bottom and that the Anglo-Saxon capital market model of governance is little short of a catastrophe. Yet in his latest book Mr Mayer puts his finger on so many serious flaws in the way the US and UK systems work that he deserves a hearing.

His starting point concerns the role of the corporation. While accepting that it is a protean organisational form with a huge capacity for good, he worries that while it feeds, houses, educates and transports us, the corporation also exploits, pollutes, poisons and impoverishes. Where previously the actions of companies could be devastating for their customers, suppliers and investors, they now have the ability to destroy economies, communities and species. “It is not an exaggeration,” says Mr Mayer, “to say that through their negligence, incompetence, greed, or fraud, corporations are a threat to our livelihood and the world we live in.”

Read more of the review…

Nine Shades of Corporate Gray
Shareholder activist Robert A.G. “Bob” Monks will soon publish a new book – working title: Corporate Competitiveness. His ninth book on the subject, this one will “focus on corporate power – not only in business in finance, but power in our government and even over the public dialogue about what is best for our country.” Those familiar with Monks’ persistence in this domain may be tempted to nickname the book Die Hard 9, but for connoisseurs of his writings, the better comparison would be Claude Monet’s Rouen cathedral series, which depicts the massive structure multiple times to capture its complexities. Each of Monks’ books is an entirely new and useful (if troubling) look at the behemoth we know as the modern multinational corporation.
Monks started his corporate series more than two decades ago when he joined fellow activist Nell Minow to write Power and Accountability (1991), lamenting that corporations had too much of the former and not enough of the latte. The two then co-wrote the 1995 classic Corporate Governance and co-authored a series of editions (most recently the fifth), as well as Watching the Watchers, bearing down on boards. Monks would go on to write the Emperor’s Nightingale (1998), depicting the corporation as a complex adaptive system, and The New Global Investors (2001), focusing on global investor impact. His novel Reel and Rout (2004) took reads into the sometimes-ruthless world of global corporate takeovers. Corpocracy, a blatant critique of large-company CEOs, followed in 2007. Monks’ most recent offering (2011), co-authored with a self-described “pro-corporate conservative” (the undersigned reviewer) was Corporate Valuation for Portfolio Investment – a doorstopper for sure, yet also a page turner for those wanting to know the metrics for measuring not only assets, earnings, cash flow, and stock price, but also governance – a term that Monks and Minow helped to put on the map.
–Alexandra R. Lajoux, Directorship

Note: In the same issue of NACD Directorship, Lajoux calls Monks a "Voice in the Wilderness" recalling when he advocated sustainability reporting more than 15 years ago. Read it.

Miniver Press is giving away free Kindle ebook versions of Citizens DisUnited for this weekend only as an introduction to the book. We'd love for you to read it so email editor@miniverpress.com to get your copy.

My new book, Citizens DisUnited: Passive Investors, Drone CEOs and the Corporate Capture of the American Dream, will be out next week.  I thought I'd post the book description and see what you think.  It'll be available through major online booksellers.  More details and links to the book soon…

Democratic capitalism—the source of America’s vast wealth, the foundation of our entire economic system—is threatened as never before, not from without but from within. Shareholders today no longer own, except in the narrowest legal sense, the corporations they have invested in. Emboldened by the Supreme Court and enabled by a compliant Congress and compromised regulators, America’s CEOs have staged a corporate coup d’état. They, not the titular owners of the businesses, decide where and how company resources will be deployed, what laws will be evaded in the pursuit of short-term gain, what offshore havens profits will be stashed in to avoid taxation, and critically, how lavishly the CEOs themselves will be compensated.

Far too much of American business is being run for the personal enrichment and glorification of its manager-kings. This book shows how that happened and unveils, for the first time, a new study showing that corporations “un-owned” by their shareholders—corporate “drones”—are far worse corporate citizens and have significantly lower average shareholder returns than firms in which owners still exercise authority over management. Manager-kings, it turns out, are bad both for society and for business itself.