Democracies and Mutual Respect

If corporations were not around to provide goods and services, who do you propose do it?

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If corporations were not around to provide goods and services, who do you propose do it?

Anti-corporation is not the same thing as anti-business. I imagine that products, goods and services would be provided by businesses, the same way the were for hundreds of years, before the modern Corporation was invented.

It isn't as if people wandered around not knowing where to buy a hammer before the corporation was invented...

Cycloptichorn

Why What Happened at Home Depot's Annual Meeting Matters
by Jay Elias
Wed Jun 14, 2006 at 04:00:45 PM PDT

A couple of weeks ago, on May 25th in Wilmington, Delaware, Home Depot held its annual shareholders meeting. What happened there has been described by observers as "cowardly", "disgusting", "disgraceful" and "contemptous". It was all of those things. But it is also extremely telling as to how so many of our major corporations have become organizations that serve no one well, and how they can be taken back and made responsible.

The situation at the annual meeting was set for controversy, as Home Depot's CEO, Robert L. Nardelli, has become the latest poster child for runaway executive pay. Mr. Nardelli has been awarded compensation by the Home Depot board of $245 million in the five years he has been CEO of the company, including $37.1 million last year alone. Over those five years, the stock of Home Depot has fallen by 12%, while the stock of its closest competitor, Lowe's, has risen 173%. Stockholders, who own the company Mr. Nardelli is getting so richly compensated for ill-serving, were set to withhold votes from the directors who Mr. Nardelli has asked them to approve for the board at the annual meeting.

What happened next was a circus. Only one of the eleven directors of the company showed up, Mr. Nardelli. In fact, no chairs were even set up for the other directors. Mr. Nardelli permitted one question per person, with one minute each to speak (time was kept on a large digital clock). Questions such as what steps will the board take to address conflicts of interest were given terse, single sentence responses (the answer to that particular question was "This is not the forum in which to address these comments."). Shareholders who did not stop speaking when their time expired were approached by men described by Joe Nocera of the New York Times as "big, strong men, some wearing Home Depot aprons, who look as if they could be bouncers at a rowdy club." The vote tallies for the stockholder issues were kept secret. The entire meeting lasted less than an hour.

Why does this story matter? What makes it more than another story of how CEOs and corporate directors consider themselves above any responsibility, be it to their country, their employees, or their shareholders (who ostensibly own the company)? After all, Home Depot has already made concessions, vowing to "return to our traditional format for next year's annual shareholders meeting, which will include a business overview, the presentation of proposals, an opportunity for shareholder questions and with the board of directors in attendance."

We sometimes forget that in a free and democratic society, the notions of freedom and democracy are not only our covenant with our government, but with one another. What meaning does capitalism have if contracts are unenforcable against the powerful, other than as an excuse for the inequitable distribution of wealth?

The formative idea of the publicly-held corporation is that of voluntary democracy; for the price of a share, you can purchase your stake in a company, to share in the profits and the decision-making that directs the enterprise. Yet today, we have seen the disappearance of that democracy. But this is changing.

A movement has begun among investors to retake their role in the choosing of the boards of directors. Proposals to require the election of directors by a minimum of a majority of shareholders have been raised at 140 companies this year. More than half of the shareholders voted for these proposals at Bank of America, International Paper, and Verizon. Right now, the SEC is considering whether or not to allow shareholders in CA, the software company once known as Computer Associates, to hold a vote on two long-term members of the board, over the strong objections of CA. A special committee of the New York Stock Exchange has recommended that the NYSE abolish a 70 year old rule allowing brokerage firms to vote shares in director elections if their clients do not give them instructions.

Who are the people most robbed by the corporate scandals and mismanagement we have observed in the past decade? Who loses most when the Enrons and Global Crossings give out hundreds of millions in compensation to incompetent and criminal executives?

The shareholders. The employees with shares in their 401(k) funds. The unions with their members' pensions invested in the market. The parents saving for their childrens' education.

What happened at the Home Depot shareholders' meeting affects us all that way. The fight to take back companies from their executives to their owners is the most effective means at our disposal to restore both fiscal sanity to our corporations, and to restore power to the people who have paid for their share in it. This is a fight worth paying attention to.

You will note that I used the word 'modern' when describing the Corporation and it's problems. It isn't the idea which is bad, as much as the laws which have been applied to it.

Cycloptichorn wrote:

You will note that I used the word 'modern' when describing the Corporation and it's problems. It isn't the idea which is bad, as much as the laws which have been applied to it.

Okay, then its not the concept of corporations, but how they are run? The only alternative to a corporation as far as I can imagine are (1) rich individuals or partnerships, or (2) government. I reject option #2, and as of now, option #1 is operational and can enter the marketplace anywhere anytime if they can compete.

I am not against consideration of some reform of laws and rules, including tax law, governing incorporating. I just reject the notion of throwing out the baby with the bathwater. I am sick and tired of hearing the demonization of corporations, when in reality all of us enjoy the abundant fruits of excellent products and services every single day that we would not otherwise enjoy without hard working people running corporations. Also, many or most of us own shares in corporations, and often our retirement funds depend upon their success.

Agreed 100%. And as the old saying goes, business does not pay taxes. Of course it is implied that the customers end up paying the taxes through higher prices, which is absolutely true. Also, the term "corporation" is just a name to describe a business organization owned and operated by real people. Those real people include many of us or our neighbors on the block. Thank goodness its them instead of some bureaucracy or politburo thousands of miles away running the businesses. If that happened, and that politburo was run by plainoldme, I would no longer be able to buy Pringles to enjoy as I do. She thinks they are "crap" and people only buy them because they are told to.

As I said earlier, the problem comes when the investors are so far removed from the company, that they don't care about anything but making money any longer, and it encourages business practices which are quite bad for our society - pollution, government corruption, etc.

Cycloptichorn

Cycloptichorn wrote:

As I said earlier, the problem comes when the investors are so far removed from the company, that they don't care about anything but making money any longer, and it encourages business practices which are quite bad for our society - pollution, government corruption, etc.

Cycloptichorn

You are not giving competitive forces credit where credit is due. It should be obvious to the most casual observer without requiring me to point it out, but I will, if profit was the only motive and quality of product for the price and other factors like public relations / image don't matter to a company anymore, how long does that company compete profitably? The answer should be obvious.

When I used to work for a corporation, engineers feared the "bean counters" having too much influence over business decisions. Obviously they needed to have some, but there needs to be the correct balance. You have a point inasmuch as some managers can milk a company for the profits for a while, but ultimately the company pays the price and loses market share, and if let go too long, they go bellyup. ITS CALLED COMPETITION! If a company is not managed correctly, with temporary profits reaped at the expense of longer term health of the company, the company suffers, and a better one takes over, and consumers reap the benefits of it. With open and free competition, consumers ultimately win.

The system is not perfect, just as people are not perfect, but it is the best option we have. Let us not deceive ourselves into thinking a better one exists.

Certain perks and waivers can entice a large employer to locate in your area.

Foxfyre wrote:

Certain perks and waivers can entice a large employer to locate in your area.

Your above quote caught my eye. I'm not sure if you said this as a negative or a positive. One of my pet peeves is government entities, city, county, and state, giving tax breaks to big companies to entice them to locate in the area of jurisdiction for the purpose of attracting jobs. I believe this is grossly unethical. It should be illegal. I think it is, but it has not been thoroughly aired in the courts. Why should a mom and pop business located in a city continue to pay sales taxes or property taxes, while a large company can be offered waivers on such taxes by the taxing authorities? In such cases, governments are creating an uneven playing field, whereby a large company can drive existing businesses out of business.

When government creates an uneven playing field, they are intruding into the world of competition and creating unfair competition. They should keep their noses out of it.

A local authority should be entirely free to set tax rates, but whatever they are, they should apply to every business rather than on a case by case basis. Local authorities would still be free to even eliminate taxes completely, as some states do with income tax, but whatever they do, it should apply across the board. I am not sure why people are not up in total arms over this or why this problem has not been addressed already?

Having a large businees in town is much better for a community then not having a large businees in town (depending on the town and the business of course) Tax breaks and incentives drive a business to commit itself to a community. Why would a business chose to locate to New York when taxes are much lower in pennsylvania? Because they are offered tax breaks and incentives. It part of the business world.

McGentrix wrote:

Having a large businees in town is much better for a community then not having a large businees in town (depending on the town and the business of course) Tax breaks and incentives drive a business to commit itself to a community. Why would a business chose to locate to New York when taxes are much lower in pennsylvania? Because they are offered tax breaks and incentives. It part of the business world.

Thats fine if New York offers the same deal to all the other businesses. If they offer a sweetheart deal to one company but not to another, that seems grossly unfair in my opinion. That is a double standard and I would think laws should apply equally to all citizens.

I don't have any problem with a community doing what it needs to do to attract good jobs. Rio Rancho NM was just a wide spot in the road when its community leaders had the foresight to put together an extremely lucrative land and tax deal to attract a huge Intel plant to town. Intel is now the #1 employer and, by virtue of its presence, many other great companies have also located in Rio Rancho. Their land area now exceeds the adjacent Albuquerque and I think their population will exceed Albuquerque within the next 10 years. All the little guys benefit from the increased and prosperous consumer base. It was a win win deal for everybody.

These kinds of deals must of necessity be to increase opportunities for everybody and I would oppose any such deals that would create competition. For instance you don't want to give tax breaks to an Eckhard Drug Store chain when Walgreens is already well established in your area. And you don't give Wal-mart a tax break so they'll move in to compete with Target. But to entice an industry that will add to, not compete with, the rest of the community and improve the climate for everybody, that's a-okay with me.

So you would deny prosperity to a town by insisting they offer the same deal to everybody when they can only afford to offer it to one?