The Handbook of Board Governance

19The Happy Myth, Sad RealityCapitalism without Owners Will Fail

Robert A. G. Monks

Pioneering Shareholder Activist and Corporate Governance Advisor

A dozen years ago, Allen Sykes and I warned that we could no longer expect the business corporation to function within society as the dynamo of wealth creation in the same manner as it has been doing for a century or more.¹ Our hope was that energized owners—enlightened fiduciaries—might be able to reverse this trend. This has not happened. Today, it is clear that the traditional, publicly traded U.S. corporation has largely ceased being exclusively a profit-seeking creature to one focused on power, the power to control the environment within which it functions.

We will begin by a brief look backward to what I will style received wisdom of what an American corporation was and how it related to society.

Received Wisdom

The American economy is a corporate system, in the sense that control of the economic factors of production and distribution is vested largely in the hands of privately appointed corporate managers. This system is legitimized on three major bases. The first is a belief that the shareholders, as the owners of the corporation, have the ultimate right to control it. The second is a belief that corporate managers are accountable for their performance. The third is a belief that placing control of the factors of production and distribution in the hands of privately appointed corporate managers, who are accountable for ...