Yesterday we looked at the idea that both progressive liberalism and traditional conservatism resist yielding, if you will, power to the people. But the places where the people are in control are those found at the crown and roof of things. Those where the people are learning to insist on shouldering control of their own affairs are crowding their way in (and welcome to them).
Those, on the other hand, that cling to old elitist beliefs on the left or right of whatever continuum you care to name are either at the bottom of the heap or in danger of finding themselves there as the world reorganizes itself, after millennia of stagnation, into a new heap.
In the political sphere, this refers principally to the spread of democratic government originating in the people, themselves. In the economic realm, it is associated with the generally unimpeded practice of capitalism and free trade where the people are possessed of their own property and labor. Both democracy and capitalism have flourished in those places where people have seized the political and economic sovereignty, and maintained and strengthened their expression of it.
And that latter part touches on the key issue: expression of ownership. Where that breaks down or is intercepted, a vacuum is created. Those, of course, are soon filled, often resulting, at the very least, in a distortion, if not a rollback, of the natural operation of democratic and capitalist structures.
And that brings us to the phenomenon of the anonymous shareholder-owned corporation. This means of organizing business endeavors has a number of brilliant attributes, of course, which have been behind a great deal of the spreading prosperity of the modern world. A major part of this is the famous corporate veil, which protects these anonymous investors from personal liability for the actions of the corporations they own, other than possibly in the form of loss of share value.
Unfortunately, that veil also obscures the expression of ownership, creating a vacuum of power which has been filled in ways that inevitably distort the operation of the invisible hand of self interest as described by Adam Smith. And this is where the problem enters in. Those distortions have long gone unnoticed, and developed into practices that, however irregular or even absurd, are now defended as veritable pillars of the capitalist system itself.
But the pies are flying, and we will all have some on our faces if we don’t stop kidding ourselves about what is happening and address this dysfunctional situation head on. We’ll be talking more about that in the coming days. Please do stop by and join in.
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This post is a part of a series. You can learn about and link to the other articles here: Corporate Governance and Capitalism
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Today’s tips: Speaking of the path to development - what is the evidence that it is through democratic capitalism rather than through elitist intervention? See this WSJ item for one strongly presented opinion.
Also, for a good discussion of a key symptom of the issues alluded to in today’s post, please see this piece by Frank Roche, of KnowHR - read it together with the comments.
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2 Comments
Hello, Jim,
I was thinking that “expression of ownership” extends to daily management practice.
“Expression of ownership” in economic and political arenas would probably be affirmed by most managers as vital to the capitalistic system. The challenge arises when they need to allow “expression of ownership” by employees in decision- making, new ideas, and different points of view. Those who do see the link are those who know the importance of building ownership on the job.
Good series.
Hi Steve,
I agree that the key here is ownership, and that ultimately it must find meaningful expression deep inside the organization, by both managers and employees. Building “ownership on the job” is key here, metaphorically, or with respect to specific procedures, decisions, initiatives, and the like.
I think the way this is interesting in the context of corporate governance is ownership by shareholders as it is expressed within the organization - if it is at all. Making that happen effectively also likely will cause “ownership on the job”, as you characterize it, by managers and employees all the more trenchant and productive.
Thanks, as always, for your visit - and for adding this important dimension to the discussion.
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[...] As we mentioned yesterday, the corporate veil describes a legal principle of protecting owners from liability for the actions of the owned corporation. This has the effect of freeing up additional sources of capital and increasing its liquidity for investment. It is somewhat less well known that the veil also was intended to protect directors - and even officers - as well. [...]
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