The Divine Right of Capital: Dethroning the Corporate Aristocracy
Product Description
Wealth inequity, corporate welfare, and industrial pollution are the symptoms of our sickened economy, Marjorie Kelly suggests. The underlying illness is shareholder primacy. In The Divine Right of Capital, she shows that the corporate drive to maximize shareholder profits at any cost is not only out of step with democratic and free-market principles, but is detrimental to the long-term health of individual companies and the economy as a whole. Kelly, the cofounder and editor of the national journal Business Ethics, offers a far-reaching solution to rebuild corporations in a way that serves all. The Divine Right of Capital is a radical critique of the corporate economy, newly updated with information on Enron and other business scandals…. More >>
The Divine Right of Capital: Dethroning the Corporate Aristocracy
Marjorie Kelly stands heads above her comrades in shouting the old adage “From each according to his abilities, to each according to his needs” from the father of wealth discrimination, Karl Marx. She pounds her pulpit to not just reform our economic society but to invert it. Her scheme for change requires more government intervention and less free capitalism. She is clearly in left field. The fedgov through their meddling in forbidding areas has created the mess we are seeing today. Corporations are abiding to compliant ethics (established by meddling government bureaucrats) and no more. Free capitalism abides to the divine ethics and does unto others as they would want done unto them. Ms. Kelly and those who like this book should reread Animal Farm, visit the Von Mises website or check economic books by Carson, Hazlitt or Sennholz.
Rating: 1 / 5
Wonderful example of how undisciplined, muddled thinking can create unsound arguments, based on invalid premises, that yield conclusions that will confirm one’s biases. Perhaps in a follow-up book, the author will “prove” that the world is flat. An early mistake: She declares that it is (mostly) false that stockholders fund major public corporations, noting that shares trade in secondary markets. Accordingly, she draws the conclusion that there is no reason that corporations should maximize the interests of stockholders and minimize the interests of shareholders, and that it would be just as appropriate to put the interests of employees first. In fact, clear economic thinking reveals that successful corporations do make the interests of employees a high priority, because a corporation with unhappy employees has difficulty retaining employees, which makes for an unsuccessful company. Further, when a corporation raises capital, it often does so by means of a public offering of securities, which is really an agreement between the corporation and the stockholders where the stockholders give the corporation money in exchange for the right to an ownership interest in the corporation. Whether the shares stay in the hands of the original purchaser or whether the purchaser sells them in secondary markets is not germain; whoever holds the shares holds the right to the ownership interest, which may yield value through appreciation, sale or dividends. If you think her argument that it would be equally appropriate for a corporation to maximize payments to employees and minimize the interests of stockholders, just try this little exercise: Form a coproration and attempt to raise capital to run the corporation (including to pay employees). Then tell the potential investors of your plan to minimize value to stockholders. Then count how many of these potential investors actually invest their money in your corporation. (Hint: if you guessed more than zero, you’re too high.)
Rating: 1 / 5
There are three types of people who will read this book: confirmed leftists who have already heard the cant and chant the mantra, the uninitiated who will find this work to be a stunning revelation (without exposure to other arguments), and critics who recognize the asteroid-sized holes in her logic.
Like many of her fellow travelers, the author tosses around words like “humanity”, “community”, “the common good”, etc., as if there were an agreed upon consensus as to what these terms entail. Wrong. The author reserves to herself and her comrades the right to make the decisions as to what constitutes community values. What if the community values earning the highest rate of return on their investments, instead of achieving lofty, vague social goals? What if corporate officers are forced to abandon their current fiduciary responsibility to earn the highest rate of return for their stockholders, in lieu of pursuing those same goals? Exactly. Good Intellectuals will formulate the Correct Definitions of the Social Good, and Good Bureaucrats will (attempt to) force corporations to achieve those goals.
With ambiguous definitions of the communal good grafted to poor accounting practice, the principles of property rights are gutted, with the predictable results as incentives to earn the highest rates of returns are exchanged for incentives to engage in questionable, socially-relevant boondoggles, scams, political graft, and payoffs to friends of the Good People. Anyone searching for theoretical and real-world examples of this concept in action merely need examine the massive studies of government created/maintained monopolies (TVA, the US Postal Service, etc.), or the behavior of corporations in kleptocratic Third-World nations.
Corporations cease to pursue growth opportunities, take risks, or engage in long-term investing due to the uncertainty concerning property rights and the ability of the Good People to invent new and creative methods for separating shareholders from their money (the answer, although never stated in the book, is to have the Good Bureaucrats make long-term investment decisions, as they have done so with such stunning success in Eastern Europe, the Soviet Union, the PRC, Cambodia, Brazil, etc.).
The results of enacting these policies are low-to-negative economic growth, social breakdown, and the growth in the belief that might makes right, and that asset seizure (theft) in the name of the common good will lead to prosperity for all.
Rating: 4 / 5
I love this book. I’m part way through it now, and I cannot read it at night before bedtime because it keeps me awake, it is so exciting! The author does an excellent job of 1) exposing the weak foundations of the notions of capitalism (please don’t confuse this with the free market) and 2) of offering replacement paradigms. This is not a woe-is-me book. It is a book with a positive message. — I just bought two more copies; these are destined for our public library.
Rating: 5 / 5
I bought this book a while ago, but only now finished it. What the author wrote about feudal capitalism has become very painfully obvious with the Enron and Worldcom meltdowns.
I found the section on comparing Feudal Lords to CEOs a rather enlightening section (and sadly, all too true.)
If you want to understand why Lay and Ebbers, et al did what they did, then this book is for you.
Rating: 5 / 5