The Cost of a False Freedom

A Review of Citizens DisUnited by Robert AG Monks

It probably shouldn’t surprise anyone if the typical reader of the financial press has formed the impression that we as a culture have essentially done what we needed to do about corporate governance. We used to ignore it, now we talk about it. We pass laws and regulations to improve corporate transparency and accountability. Some of the most perverse governance practices (e.g., dual share classes, combined chair/CEO positions) are dwindling. Perhaps, we should stage a photo op in front of a banner that exclaims “Mission Accomplished”.

Bob Monks’ latest book delivers a full-throated wake-up call to break the spell of this self-congratulatory delusion. The book depicts a systemic institutional complicity in rewarding corporate behavior grounded in unwholesome incentives and shielded from undeniable consequences. Hence, the book begins with a quote from Edith Hamilton: “When the freedom they wished for most was freedom from responsibility, then Athens ceased to be free and was never free again.”

Citizens DisUnited tackles much more than the yearning of corporations to seize gains and externalize risks. This book gives voice to the growing disenchantment with a political process hijacked and pressed into the service of interests fundamentally at odds with democratic capitalism.

The book is a forensic analysis, a risk assessment, a call to action and a fresh rethinking of the repercussions of corporate character. The book examines the faults of the modern corporation with the patient attention of a pathologist studying tumor cells. But rather than fixate on the alarming diagnosis, Monks writes with the clear intent to breathe fresh energy into the study and critique of corporate governance.

Citizens DisUnited succeeds in this mission in several ways. First, looking holistically at the malfunctioning ecosystem of corporations, government leaders, regulators and investors, the book debunks premature self-congratulation about progress in corporate governance. Monks shows that many celebrated improvements have been slow and superficial, vitiated by half-measures and bureaucratic hand-wringing. Current laws and regulations still enable the same practices that brought us to this painful juncture in the evolution of the modern corporation.

Second, Citizens DisUnited unequivocally identifies what matters most in moving modern capital markets toward deeper systemic transparency and accountability. Monks calls on asset owners to embrace a culture of active ownership, a culture mindful of risks stemming from misalignments of insider and investor interests.

Third, Monks alerts market participants to the perversions of language that materially distort assessments of corporate governance at specific companies and across capital markets. He points to the blatant disassociation of words such as “election,” “independence” and “director” from their traditional mainstream meaning.

Finally, Citizens DisUnited introduces (in Chapter 6) an important approach to identifying companies disconnected from the interests of the people and institutions financing their existence. Monks’ colorful portrayal of “drone corporations” deliberately alludes to the drone planes made famous by post-9/11 media coverage. The central contention here is that some public companies are so widely held that they continue to function without genuine leadership that safeguards the interests of owners or the broader society.

These are all timely reminders, especially when the political will for corporate reform occasionally suffers setbacks. Progressive convictions often become encrusted with doubt, clear principles co-opted by lip-service and complacence. Mindful of these vicissitudes, Citizens DisUnited argues forcefully that the mission is not yet accomplished; the battle is not yet won; the modern corporation still sorely needs a renaissance of real leadership.

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