Corporate Power and Ownership in Contemporary Capitalism: The Politics of Resistance and Domination

Citation

Radice, H. (2011), "Corporate Power and Ownership in Contemporary Capitalism: The Politics of Resistance and Domination", Critical Perspectives on International Business, Vol. 7 No. 1, pp. 109-110. https://doi.org/10.1108/17422041111103868

As the author rightly notes, critical discussion of corporate power and ownership has in recent years taken place only within the narrow confines of business and financial economics. This is surprising in historical perspective, given the importance attached to the corporation as a capitalist institution by influential writers such as Veblen, Hilferding, Sombart, Weber, Baran and Sweezy or Galbraith, as well as more specific twentieth‐century studies of ownership and its consequences by Berle and Means, Burnham and Marris, among others. But Soederberg contends in her introduction that the modern corporate governance (hereafter CG) doctrine is closed off from challenge by its specific ontological and epistemological assumptions, which lead to a singular focus on the ownership rights of shareholders; her aim is to force open this doctrine, and subject it to critical appraisal from the standpoint of social interests subordinated to corporate power. Although there is some reference to other societies, her analysis is very largely restricted to the case of the USA.

The next three chapters, making up Part II of the book, examine the relationship between corporate power and the changing nature of mass investment. Chapter 2 focuses on the political idea of the ownership society, and its relation to the creeping replacement of state‐run social security by private savings through pension plans, especially of the defined‐contribution type. These have greatly increased the proportion of the population who depend for their subsistence in retirement on stock market performance, thereby legitimising share value‐maximisation as the sole CG performance criterion. Chapter 3 moves on to examine how this viewpoint has underpinned CG “reforms”. Here, Soederberg identifies and criticises three key assumptions of the CG doctrine: Fama's efficient markets hypothesis, the neutrality of the state (and thus laws) between citizens; and the pluralist and democratic nature of the relations between shareholders as principals, and managers as their agents. Enron and other cases of corporate malfeasance in the early 2000s exposed the weakness of these assumptions, but the response of the US state, notably the Sarbanes‐Oxley Act, instead validated and reinforced the principles of market efficiency and self‐regulation for both corporations and financial markets. Chapter 4 then moves inside the corporation, examining the realities of the distribution of power among shareholders, and between them and senior management. The focus here is on the “equal access” proposal, under which all shareholders would be guaranteed the right to nominate directors and determine the agenda of shareholders' meetings. In explaining why this proposal has met with such sustained and effective opposition from key business élite organisations, Soederberg debunks the received wisdom of the separation of ownership from control, showing how studies throughout the last hundred years have uncovered the persistent exercise of power by the super‐rich.

Part III then examines the nature and limitations of shareholder activism in the face of entrenched corporate power. Chapter 5 addresses the widespread growth of trade union shareholder activism, aimed primarily at protecting workers' pension rights, advancing other aspects of their welfare, and challenging excessive executive compensation. The meagre results of this activism have been attributed to stock‐market short‐termism, which focuses on the immediate stock returns rather than long‐term corporate performance, and to the dominance of insider executives in the allocation of corporate resources. Soederberg argues that this approach ignores the fundamentally exploitative relation between capital and labour; the state's legal and political support of capital; the erosion of collective consciousness among workers as a result of labour relations reform and the broader context of individualist neoliberal ideology; and the way money flows are organised under capitalist control in the credit system. Chapter 6 examines the specific case of Permissible Country Index developed by the California Public Employees' Retirement System, CalPERS, to appraise the foreign investment proposals of corporations in which they hold stock. In the context of the shift from public to private financing of investment projects in less developed countries, the PCI is intended to encourage investment practices that embody a concern for social factors rather than simply profit. However, its impact is severely limited by the commitment of CalPERS to the Anglo‐American model of shareholder value maximisation, albeit disguised by the euphemistic term “enduring value”. Chapter 7 then examines the broader issue of socially‐responsible investment, including a case study of the Sudan Divestment Campaign. Here Soederberg argues that attempting to “marketize” social justice, by deploying market pressure rather than state power, reinforces the overall effect of hegemonic neoliberalism on the global distribution of wealth and power.

In conclusion, this is a valuable addition to the modern critical literature on the corporation. Soederberg has shown how the corporate governance doctrine dovetails closely with the wider shift from state regulation to market self‐regulation that has been so central to the rise of neoliberalism. If challenges to corporate power are to be effective, they must escape from the blind alley of shareholder activism, and return to open and independent political engagement.

A About the reviewer

Hugo Radice edited International Firms and Modern Imperialism (Penguin 1975), and taught courses on TNCs and development from 1982 to 2005. He is a Life Fellow of the School of Politics and International Studies, University of Leeds. For current research and recent publications see www.polis.leeds.ac.uk/about/staff/radice