A few years ago Time-Warner’s Fortune Magazine headlined a cover story on the staggering pay spiral of top corporate bosses and why nothing will be done to stop these over-the-top compensation packages. “Whew” I reacted – this coming from one of the nation’s premier business publications – is a pretty good confirmation of a century-long silent coup d’etat against the rights of the owners of capital. The owners are the shareholders, of course. In capitalistic theory, owners are supposed to control what they own. For decades, the managers and the rubber-stamp, pampered boards of directors have seized that control for themselves. Thus, my use of the phrase “corporate capitalism.”
The legal innovation that helped strip owners from controlling their large corporation is called the “business judgment” rule accepted by the courts. This rule shields members of the boards of directors from being held personally liable for approving decisions that seriously harmed their company or got their company into trouble, so long as these Boards can show they acted in good faith and with due care. Such a showing has often come in the garb of “not knowing” that the books were being cooked or that profits were being secretly inflated by company executives and accounting firms.
See full Article.
Posts
