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The Divine Right of Capital

Dethroning the Corporate Aristocracy

by Marjorie Kelly

Berrett-Koehler Publishers, 2003, paperback

The Divine Right of Capital exposes the fundamental ills of the corporate system. Marjorie Kelly argues that focusing on making profits for stockholders to the exclusion of everyone else's interests in a form of discrimination based on property or wealth. She shows how this bias is held by our institutional structures, much as they once held biases against blacks and women.

Why is it taken for granted that stockholder earnings are the proper measure of a company's success? Wouldn't the rising incomes of employees be a reasonable measurement? Kelly points out that although stockholders supposedly "fund" corporations, most invested dollars remain in the speculative market and don't reach companies.

Praise for The Divine Right of Capital

"Brilliant. So simple. So direct. And so beautifully written. I think we have found our Thomas Paine for the new millennium." --David Korten, author of When Corporations Rule the World

"Marjorie Kelly has systematically deconstructed a sacred cow--that corporations exist to maximize shareholder wealth--and reconstructed a vision for a truly democratic economy that rewards all who are responsible for profits, particularly employees."-- Leslie Christian, President, Progressive Investment Management

"The book brims--actually spills over-- with unsanctioned ideas and imaginative new directions. The strength of Kelly's case is that it demonstrates that structural changes in business, far from being radical, are grounded in the founding ideals of America."--From the Forward by William Greider, author of One World, Ready or Not

"A marvelous piece of work--clear, concise, and beautifully written. It raises all the right questions with insight and provocative observations."--Dee Hock, Founder and CEO Emeritus, Visa International

Quotes from The Divine Right of Capital

"I myself am a small business owner, as were my father and grandfather before me. As a business publisher and journalist, I have seen that a democratic evolution in business has been trying to happen for some time--with growing attention to environmental stewardship, employee profit sharing, family-friendly policies, and good corporate citizenship. Fourteen years ago, I cofounded the publication Business Ethics to support this rise in corporate social responsibility, believing that voluntary change by progressive businesspeople would transform capitalism. I no longer believe that."

"After more than a decade of advocating corporate social responsibility and seeing its promise often thwarted, I've come to ask myself, What is blocking change? The answer is now obvious to me. It's the mandate to maximize returns for shareholders, which means serving the interests of wealth before all other interests. It is a system wide mandate that cannot be overcome by individual companies. It is a legal mandate with which voluntary change can't compete.

"This mandate, quite simply, is a form of discrimination: wealth discrimination. It is rooted in an ancient, aristocratic world view that says those who own property or wealth are superior. It is a form of entitlement out of place in a market economy.

"We can move to a true market economy, where all economic rights are equally protected, and where all persons are equally empowered to pursue self-interest. We can design new economic structures--new ways to hire CEOs, new financial statements, new concepts of fiduciary duty, and new forms of citizenship in corporate governance--that embody both democratic and market ideals.'--pp. xii-xiii

. . .

"We might note that while employees and the community are left to the protection of the invisible hand, wealth is protected by the visible hand of government and corporations. But this is something, it is hoped, that will be overlooked.

"To help us begin to see it, we might, for a moment, imagine a different arrangement of institutional power. Picture a free market in which labor rights are enthroned in law, and property rights are left to the invisible hand. This would be a world in which we believe employees are the corporation. They are, after all, the ones running the place. Hence only employees could vote for the board of directors, and the purpose of the corporation would be to maximize income for employees. In theory, stockholders would receive income they negotiated through contracts. In practice, the corporation would dictate those contracts with little real negotiation, and stockholders could accept the terms or go elsewhere, only to find other corporations offering nearly identical (and dismal) terms.

"In this world, stock would be sold in a manner controlled entirely by the corporation, much as wages are set today. Stockholders would appear alone at the company, where they would be taken into a room and made an offer. There would be no reliable way to compare current stock price to past price, to compare the price one person receives to what others receive, or to compare prices from one corporation to another. Wage and benefit data would be published daily in the Main Street Journal, and the movement of the Dow Jones wage index would of course be tracked nightly on the news. But returns to shareholders would be considered proprietary information and would not be given out.

"If stockholders tried to improve their negotiating position by organizing into mutual funds, corporations would threaten to cut off payments altogether. The companies would talk about replacing stockholder money with funds from people overseas who were willing to accept lower returns.

"And of course overseas, stockholders would have even less power. Although free trade agreements would provide intricate protections for labor and environmental rights, they would offer capital no protections. 'What does capital have to do with trade?' pundits might ask. 'Trade is about goods and services and the people who create them, it's not about capital.'

"When the newspapers said 'the corporation did well,' they would mean that employees did well. Stockholders might have seen no dividend increases in years. Some might even have seen their income terminated in 'capital layoffs.' But whenever anyone dared to suggest changes in this economic order, they would be said to be 'tampering with the free market.'"--pp. 77-79.

. . .

"The notion of economic sovereignty is worth examining a bit, for there's more to it than voting rights. We might note, for example, that it has both an internal and an external component, as masculine political sovereignty once did. In an earlier age, men held power both inside the family and outside it, in society--their sovereignty was internal and external to the family. In like manner, economic sovereignty is internal and external to the corporation. Internally, stockholders are sovereign because the corporation is said to be private. Externally, they are sovereign because the free market must self-regulate

"Inside the corporation, stockholder sovereignty is manifest in the notion that rising income for stockholders is good, while rising income for employees is bad. Externally, capital sovereignty is manifest in, for example, Federal Reserve policy, which similarly views wage gains as bad (that is inflationary), while it views stock market gains, for the most part, as good (they are not counted indirectly in measures of inflation). As long as stock market gains don't overheat the consuming economy, they are limitless. But labor must be kept in its place. If wages were to triple, the Federal Reserve would go berserk. But the stock market tripled in a matter of years, and the Fed considered the economy healthy. That's economic sovereignty. It's a question of whose interests are considered one with the health of the economy." p.85

. . .

"Stockholders, as the body politic, can do no wrong. Certainly they bear no responsibility for what the corporation does wrong, due to the doctrine of limited liability. And however ruthless the actions they require--closing factories, clear-cutting forests--those actions are right. The stockholder body politic 'is not only incapable of doing wrong, but even of thinking wrong.' Like fictions about the king, corporate fictions serve a single purpose: to protect current arrangements of power." --pp. 90-91

Table of Contents of The Divine Right of Capital

    Forward by William Greider

    PART I - Economic Aristocrats
  1. The Sacred Texts
    The Principle of Worldview
  2. Lords of the Earth
    The Principle of Privilege
  3. The Corporation as Feudal Estate
    The Principle of Property
  4. Only the Propertied Class Votes
    The Principle of Governance
  5. Liberty for Me, Not for Thee
    The Principle of Liberty
  6. Wealth Reigns
    The Principle of Sovereignty

    PART II - Economic Democracy
  7. Waking Up
    The Principle of Enlightenment
  8. Emerging Property Rights
    The Principle of Equality
  9. Protecting the Common Welfare
    The Principle of the Public Good
  10. New Citizens in Corporate Governance
    The Principle of Democracy
  11. Corporations are Not Persons
    The Principle of Justice
  12. A Little Rebellion
    The Principle of (R)evolution

About Marjorie Kelly

Marjorie Kelly is the cofounder and publisher of Business Ethics, a national publication on corporate social responsibility based in Minneapolis. Kelly's writing has appeared in many publications, including The Utne Reader, The Progressive Populist, Lapis, Tikkun, Earth Island Journal, and Hope magazine, well as in a weekly column in the Minneapolis Star-Tribune.

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