Overturning the Economic Aristocracy: Toward New Models of Corporate Control. (Interview)
An Interview with Marjorie Kelly
MARJORIE KELLY IS the co-founder and publisher of Business Ethics, a Minneapolis-based publication on corporate social responsibility. Kelly is the author of The Divine Right of Capital: Dethroning the Corporate Aristocracy. She contributes a weekly column to the Minneapolis Star-Tribune, and is a frequent contributor to a wide array of national publications.
Multinational Monitor: What do you mean when you say that the market has an aristocratic bias?
Marjorie Kelly: The aristocratic bias in the corporate structure is a property bias. An aristocratic world is a property-based world. It says that those who own property are somehow superior beings to everyone else, and they alone are considered members of society. So only those who own property, which we call stock, can vote inside a corporation. Employees are just hired hands, they are really viewed as servants. The law of employer-employee relations today is literally called the law of master and servant.
When you look at the structure of the corporation, you see that everything is geared toward one purpose: To maximize gains for shareholders; in other words, create more wealth for those who already have wealth.
Structures of power rest on a basic conception of what the world is, of who matters.
We as a society used to believe that men were more real than women, or that whites were more important than blacks. The fundamental bias in a corporation or our economy is that those who own property or wealth are more important.
MM: In the Divine Right of Capital, you list the principles of what you call economic aristocracy. What is the worldview principle?
Kelly: The economic aristocracy's worldview is expressed through corporate financial statements. The aim invisibly embedded in the income statement is to pay the stockholders as much as possible and employees as little as possible. The secondary aim is to externalize all possible costs onto the community and to internalize all possible gains from the community, again in order to benefit stock holders.
MM: Your second principle is the idea of privilege.
Kelly: Stockholders claim wealth which they do little to create -- that's privilege, the privilege of receiving gains detached from productive contribution. Even though they're considered the sole members of corporate society, stockholders contribute very little.
In The Divine Right of Capital, I outline how of all the dollars trading on public stock exchanges, more than 99 percent is purely speculative. It goes from one speculator to another and never actually reaches companies to fund growth or operations.
Yet stockholders have this privilege that goes on into eternity. They put a little bit of money in a corporation and the corporation in return aims to serve them before everyone else into eternity.
This arrangement bears an interesting resemblance to the French aristocracy before the revolution. In the medieval era, the aristocracy actually had functions that went along with its privileges. The manor house was once a seat of private government -- it held court, protected people, defended territory, settled disputes and so forth. But over time, the aristocracy dropped its functions and kept its dues and fees coming in. So it became a kind of parasitic class. The interesting thing is no one noticed. No one thought to ask, Does the lord earn his keep?
Similarly today, we don't ask: Do stockholders earn their keep? We don't ask, What do stockholders contribute to the corporation to justify the extraordinary allegiance they receive? The truth is their capital input is less than zero. If you look at capital input as new equity sold minus stock buyback, net new equity is a negative number and has been for 15 of the last 20 years, according to the Federal Reserve. The so-called investing function has actually reversed itself; it is purely an extracting function at this point. …