Interview: Robert A G Monks

Born into a moneyed New England family, Robert A G Monks graduated from Harvard Law School, founded corporate governance consulting firm Institutional Shareholder Services and the investment fund Lens and served in the Reagan administration. But over recent years Monks has become an unlikely activist, leading the growing clamour for greater rights for shareholders.

Along the way he has managed to write best-selling books including The New Global Investors: How Shareholders Can Unlock Sustainable Prosperity Worldwide and has just had his first novel published. Interview by Stuart Crainer.

You don’t quite fit the stereotype of an anticapitalist protestor.

I would describe myself as a corporate reformer rather than anti-capitalist. My views are radical but I am not preaching revolution. Instead, what I am talking about is making the system work more efficiently and more fairly.

You have described the US president as the ultimate CEO. Is this a good thing?

Not at all, it is a bad thing in the context of the US. Since the Declaration of Independence one of our founding principles has been the distribution of accountable power. Our constitution disperses power.

Now we see that other sources of power have emerged – think of the Oprah Winfrey Show, for example. So what has happened is that the political model has been supplanted by an economic system in which authority is exercised along the lines of a totalitarian system. So we now have a president behaving in the autocratic and unaccountable way characteristic of CEOs and contrary to our best traditions. Corporatism has won. Corporate priorities are now routinely accepted as national priorities.

A CEO can go to war but a political leader needs to be a lot more careful, getting the support of the public and other constituencies. It is messy and troublesome but it minimises the risk of power being used stupidly. The CEO is the closest thing we now have to an absolute dictator.

There is no attempt to understand or explain where corporations fit in. Instead, there is morass of misunderstanding. I believe there can be no “philosophy” of corporations. They are legal creations, pure and simple. They are amoral, impersonal and profit maximising.

Hasn’t the corporation long wielded power?

It’s true that increasing corporate power and presence has been evident on many fronts. The influence of interest groups, for example, is nothing new in US politics. But what is new is the scale, how blatant it now is with the highest officials weaving between directorships and CEO jobs and high appointed and elected office. Thereality is that the failure of leadership from those from whom it should be expected combined with government entropy has created a political crisis, a crisis of power filled by big corporations.

If you were to trace this back, when do you think the nature of CEOs began to change?

I would go back to the creation of the Business Roundtable in the 1970s. At the time the business community was having a miserable time, having to deal with foreign competition, unions, regulators and so on. Then John Connelly, the former governor of Texas, came up with the idea of the roundtable. The Business Roundtable didn’t have a big Washington presence. There was no staff, just CEOs from large companies who were there by invitation only. The executive committee assigned projects to CEOs and then the CEOs went back to their companies and their staffs worked on the projects. So public issues were addressed using the best-paid executive resources.

The Business Roundtable was very effective. The CEOs argued as a group purportedly for their companies but also, effectively, for themselves. CEOs used it to bully the accounting profession so they withdrew their objections to options being issued without reflection on the profit and loss statement. As a result, CEOs gained a lot of money.

You think CEOs are over paid?

Twenty years ago, CEOs were happy to receive salaries that were 30 to 40 times those of entrylevel employees. Now a one-thousand times multiplier is common. This is simply the result of exercising power and is a reflection of the alldominant corporatist ethic.

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