Friday, October 15, 2010

Welcome to the Disunited Shareholders of America

The twentieth century has been characterized by three developments of great political importance: the growth of democracy, the growth of corporate power, and the growth of corporate propaganda as a means of protecting corporate power against democracy. (Alex Carey)

It's a bit trite to say that money rules in the United States.

For example, during the 2008 elections for the American Congress in slightly more than nine times out of ten the candidate that spent the most money during the campaign was elected.

Moreover, the net worth of members of the House of Representatives averages around $5 million whereas the net worth of the members of the Senate averages around $16 million.

Also, despite recessionary woes, lobbyist spending jumped upwards 5% in 2009 to attain $3.47 billion. According to Sheila Krumholz of the Centre for Responsive Politics, "lobbying appears recession proof." She added that "even when companies are scaling back other operations, many view lobbying as the critical tool in protecting their future interests, particularly when Congress is preparing to take action on issues that could seriously affect their bottom lines."

Finally, the US November elections are on track to be costliest ever. The Centre puts the price tag for this election cycle at about $3.4 billion and rising, compared to $1.6 billion for the mid-terms in 1998.

Given the strong correlation between campaign expenditures and electoral results, elections in the United States have become little more than corporate campaigns for proxy voters. During the presidential election that occurs once every four years, the financial contributions of the average citizen do come into play, but when it comes to electing members of Congress, big money rules the day. As a result, the role of the citizenry in the US is to elect the corporate Board of Directors to which the American President will have to answer to.

That being said, I'm not suggesting that in America the plutocratic shareholders have gained complete control over the United States of America. They are opposed somewhat by Institutional investors that manage union workers pension funds. There is a divergence of interest in that the plutocrats have no reservations whatsoever in maximizing profits even when doing so would harm the economy. Institutional investors managing public pension plans, on the other hand, are less apt to do so since they must answer to the representatives of the pension fund contributors.

Notwithstanding, once we factor in the recent US Supreme Court ruling that struck down any limits on corporate spending during American elections, the real battleground in American politics has shifted from the televised spectacle of Congressional elections to the battle of who gets on the ballot when it's time for corporations to elect their Board of Directors.

After the Enron debacle, the US Securities Exchange Commission (SEC) had to act to bring some order to the nature of corporate governance. In short, even plutocrats can't trust other plutocrats when it comes to managing the affairs of a corporation. Small cliques form often enough within corporate boards in which the said directors make off with corporate assets by engaging in fraudulent practices.

The SEC response was to allow shareholders or groups of shareholders with as little as 3% of the company's equity to be able to put their preferred candidates on the ballot to elect a publicly traded corporation's Board of Directors. This measure would make it possible for Institutional investors to find themselves represented on corporate boards from which they had been previously excluded. In a small way, corporate power could be subject to some democratic restraint.

Yet, the plutocrats would not even let even this small measure pass. The American Chamber of Commerce and the Business Roundtable filed a law suit to suspend the SEC's plans for implementation.

The federal court will decide, but by that time a new Board of Directors will be in place in Congress, one that will be even less apt than the present Congress to enact any law or support any administrative decision that impedes the pursuit of corporate profits.

In other words, business as usual in America, and there is precious little that Obama can do about it.

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