The Strange Paradox of Ownerless Capitalism

Workers at most big American Companies never hear from their owners. The owners, after all, are a vastly diffuse group of 401K investors, pension holders, life insurance purchasers, and hedge fund contributors, who may not even know which companies their money is invested in. (I don't.) This leaves the management of the company entirely up to the executives. Which is one reason American business executives are paid so much; without input from the owners, they pay themselves whatever they feel like they can get away with, and that turns out to be a lot. Instead of owners, companies respond to "the market," that is, the price of their shares. Executives obsessively watch the share price for clues as to whether they are succeeding or failing, leaving their policies at the mercy of the weird collective prejudice that passes for market knowledge.

There is a lot of evidence that companies run by their owners are different from those run in this way. You often read that big companies in Asia, dominated by one magnate or a small group, take a much longer-term approach to business, and that this is part of why they have often been able to out-compete American firms. Korean companies earn next to no profit and pay low salaries, and invest almost all their returns in growth; no market-focused company could have grown as rapidly as the Hyundai group has. Consider that in America, the companies that have grown most spectacularly over the past 20 years are new tech firms dominated by their founders: Microsoft, Apple, Google.

Since Occupy Wall Street got underway I have seen dozens of news and op-ed pieces with headlines like "What Do Americans Really Think of the Rich?" Which is a dumb question, because it is quite obvious that Americans don't think of all millionaires in the same way. There is huge respect, even reverence, for men who found companies and lead them to success, men like Henry Ford, Bill Gates and Steve Jobs who do the work and make the decisions and keep most of their fortunes invested in their own companies. And we love celebrity actors and singers whose antics add color to our lives.

There is also a deep suspicion, though, that many of the rich have not earned their money. Among the 0.1% are executives who sign fat contracts, mismanage their firms for a few years while drawing gigantic salaries, and then take 8-figure golden parachutes with them when they are finally forced out; predatory investors who wreck firms Gordon Gecko style and profit from selling off the pieces; arrangers of mergers who bring together companies, lay off thousands of workers, and pocket multi-million dollar fees. Like, for example, the members of the board that oversaw the bankruptcy of Polaroid, who seized the pension fund to pay off the company's debts, leaving the workers with $47 each and paying themselves $512,000 for six months of part time work.

No doubt there is something schizophrenic about these attitudes. Corporate titans are mostly less heroic and more corrupt than we would like, and maybe corrupt insiders sometimes do valuable work by transferring assets from failing companies to those that can use them better. I suspect the real bottom line is how well the system is working for most Americans. The resurgence of anger with corporate leaders is the result, not of increased sleaziness on their part, but of the stagnation of incomes for most people. When people are doing well themselves, they don't worry much about what the rich are doing, but when they are hurting the unfairness of the system offends them.