Unstoppable (16 page)

When things are going well with sales, profits, shareholder value, and management, discussion of this separation—so inimical
to the basic tenets of capitalism—is muted. It creates little static. Take Apple, for instance, which, until 2012, declined to pay a dividend out of its fast-growing $100 billion cash hoard and, because of rocketing share prices, received little flak from investors over this policy. But when trouble arises, as in the 2008–2009 Wall Street orgy-collapse-bailout, shareholder frustration with shattered or vaporized shares erupts. But it is an eruption without any focus or impact. Just ask the devastated individual and institutional shareholders of Citigroup, Bank of America, Merrill Lynch, Washington Mutual, AIG, Fannie Mae, and Freddie Mac or other former blue chips for confirmation. Their losses were brushed aside. In the power calculus surrounding the wreckage, as negotiations went on between Washington and Wall Street, the common shareholders mattered only tactically in addressing the question of whether the companies would be eliminated totally or allowed to survive badly shrunken, with a small chance to recover a little of their looted assets through their rescued or merged company. Author and corporate lawyer Robert Monks characterizes a system in which shareholders have this impotent status as “capitalism without owners.”

There is no clearer view of shareholder impotence exhibited and no clearer analysis of this situation than that of Republican Ben Stein writing about the numerous instances of private equity or investment buyouts of operating companies, often with the collusion of management. Stein is a lawyer and the son of Herbert Stein, who was chair of the Council of Economic Advisers under President Nixon. No more perceptive and ethical critic of Wall Street's abuses has written in the pages of the
New York Times
, the
Wall Street Journal
, and
Barron's Financial Weekly
. In a September 3, 2006,
Times
column titled, “On Buyouts, There Ought to Be a Law,” Ben Stein took note of the times in the stock market's corrective process when the asset value of shares is greater than the stock prices. This attracts firms that persuade the managers, with lucrative incentives, to go along with a low-price leveraged
buyout. The takeover men then slice and dice the company and multiply what they paid for it many times over. Stein says, “These deals should be illegal on their face . . . as a matter of law.”
²⁹

He gives the following reasons: (1) the assets belong to the shareholders to be managed by their trustee managers as a fiduciary duty to maximize their value; (2) by colluding with outside vulture investors and buying the assets on the cheap, then reaping the personal benefits, the managers are breaching that fiduciary duty and engaging in the ultimate conflict of interest; (3) the lack of disclosure of the memos for the buyout investors, saying how much they expect to make on the deal, hides from the stockholders how much more the assets the new buyers are purchasing are worth (the SEC prohibits withholding such materials); and (4) this secretive, conflicted process reeks of “insider trading” by management.

He winds up with these words: “If the stockholders have hired you (the corporate managers) and pay your wage to manage their assets, your job is to do that for them—not to buy them out at fire-sale prices and turn around and make billions that rightfully belong to them. The management buyout (with other investment banks, private equity firms, etc.) is a sad and infuriating avatar of a decadent age.”
³⁰

Other than by reading the
Wall Street Journal
and the rest of the business press for daily confirmation, does anything more need to be said to show people of all political labels that they share a need to ramp up investor power? All that remains is to propose the strategies that will organize the willing shareholder community (individuals, mutual funds, pension funds, and others) to watchdog their out-of-control, self-enriching hired hands. I have a proposal that can make sure that the investor-protection laws are strengthened and enforced.

My favorite starter idea is to have some former chairs and officials of the Securities and Exchange Commission, and other leading well-known investor power advocates (Robert Monks, John
Bogle, Paul Volcker, Arthur Levitt, William Donaldson, Lynn Turner, and Ben Stein among them), get together to urge shareholders to pledge a voluntary one cent per share per year to fund a company-by-company independent watchdog operation whose full-time staff would directly answer to each company's contributing shareholders group. A mere ten billion shares, out of trillions of outstanding shares, self-assessed one cent per share, would hire a full-time watchdog for each of the top five hundred corporations in the country. Not that hard to get rolling if we had these leaders providing seed money for a group to promote the assessment and going on TV, radio, and the Internet to push for this operation!

Let's get some convergence moving. Conservative and liberal shareholders arise to join this penny brigade! You have nothing to lose but your voiceless power to take hold of the company you own and everything to gain by protecting your share values from decline or collapse, engineered by overpaid or looting management.

The next four areas of convergence concern our health and that of the planet.

21. Ban the patenting of life forms.

This was a call that came from all sides, following the 5–4 Supreme Court decision in 1980 in
Diamond v. Chakrabarty
, which did allow such patents, in this case of a mouse gene. The call has attracted backers from the LC. An initial protest against the patenting of human and other genes came from the Council on Responsible Genetics, started by Harvard and MIT scientists. Both Jeremy Rifkin and Andrew Kimbrell did early work giving cogent reasons to oppose such patenting. Rifkin also reached out to religious leaders, who issued a statement in 1995. In their Joint Appeal against Human and Animal Patenting (1995), these leaders, numbering about one hundred and eighty, “denounced all attempts to patent nature.” In the statement, some of the members
of the Joint Appeal “compared gene patenting to slavery, while others claimed that gene patents treat human beings as marketable commodities.”
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Commercializing the world's genetic inheritance—a vastly tumultuous perturbation of Nature—is defended by Monsanto and other biotech companies (all of which have received government subsidies for their research) as providing the proper incentives to companies who will create new products, from food to medicine. The problem is that these rationalizations ignore such serious issues as consent, privacy, safety, profiteering, the possibility of the dangerous migration of engineered seeds, environmental disruption, and what some have called the danger of “playing God.”

There has been no legal and ethical framework developed to control this global corporate effort that amounts to changing the nature of nature.
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The engineering of genes has been rushing along, moving outside the lab into markets and environments far ahead of the science that has to be its governing or restraining discipline. Unlike academic science, the experiments of corporate science are neither peer-reviewed nor done openly. And this for-profit science is obviously a lot more connected to corporate political muscle in Washington, DC, than what is produced in the academies. More than 90 percent of the American people, for example, want labeling on genetically engineered foods sold in the stores. Monsanto disagrees. It is Monsanto that has prevailed over the many, ensuring that this labeling is not required by law.

There is too little convergence muscle here, given the available knowledge necessary to justify immediate efforts and tap into the latent public outrage at this commercial control of our genetic heritage. There is plenty on the record; see the website of the Council for Responsible Genetics (see
http://www.councilforresponsiblegenetics.org
). Now is the time to go on the ramparts of action to occupy a civic values position in an area where the biotech industry and its supporters are already swarming.

22. Rethink the war on drugs.

This failed program has been drawing serious critiques from both the Left and Right for years. Running from Milton Friedman, William F. Buckley, Jr., Ron Paul, and George Will to former Baltimore mayor and dean of Howard University Law School Kurt Schmoke and legal scholars like Kevin Zeese and numerous judges, the malignant folly of trying to criminalize profitable markets in addictive products has been documented. Decades of lost lives, broken users, broken families, waves of homicides, devastated societies, and violence in other nations, all without denting the overall flow of the products, have woken up thinkers and doers on all sides. Viewing drug addictions as health problems, as they are viewed for addictions manifested by tobacco users and alcoholics, seems the height of prudence, instead of viewing them as crimes whose perpetrators overfill our prisons. The classification and prosecution of drug use as a crime has activated and corrupted law enforcement, encouraged a truly self-defeating form of big government, endangered urban neighborhoods and many thousands of lives, and drained tens of billions of dollars a year from taxpayers. The war on drugs has crowded our overloaded court dockets and given our country the highest incarceration rate per capita of nonviolent offenders in the world. With decriminalization, a portion of these costs can be devoted to humane treatment of addicts, once the addictive products are brought to the surface and regulated in astute ways. We have seen repeatedly that outright prohibition does not work and breeds systems of ever-profitable crimes committed by suppliers and dealers, who produce both official corruption and serious mayhem in maintaining their turfs.

The Left-Right consensus on seeing the criminal justice system as broken is more than verbal and more than recoiling against the excessive cost to taxpayers from locking up so many nonviolent offenders for so long. It has blossomed into a regular reform drive,
manifested at the state legislative levels and spreading to the federal prison system. These reforms have not yet affected the abysmal, often sadistic conditions in these crowded prisons. Rather, they are focusing on changing the mandatory-minimum sentencing system that has stripped judges of any discretion and caused a huge arbitrary explosion in the prison population over the past thirty years, even as street crime has declined substantially.

Early on, conservative Chuck Colson, a former special assistant to President Nixon and a former inmate, having been convicted as a result of the Watergate scandal, sounded the drums against the incarceration reflex—lock 'em up and throw the keys away—through his prison ministry. Other conservatives now favoring proven approaches toward rehabilitation, education, and prevention include former Reagan attorney general Ed Meese, former congressman Asa Hutchinson, Republican Party mass mailing pioneer Richard A. Viguerie, “ethics czar” William Bennett, and, the
Washington Monthly
reported, “even the now-infamous American Legislative Exchange Council” (ALEC). These efforts, the
Monthly
avers, give political cover to Democrats terrified of appearing soft on crime before voters.
³³

Of course the longtime work on rational criminal enforcement, incarceration, and prevention policies by groups such as the ACLU, the NAACP, the Open Society Foundations, and the Public Welfare Foundation is made easier with such operating convergence or even parallel, separate efforts.

Presently, the leadership of increasing numbers of Right and Left state legislators is passing juvenile justice legislation replacing draconian law with constructive interventionist programs of education, training, close counseling, and due process to reduce incarceration. Further, states like California (SB 26) are now passing legislation that gives prisoners who committed crimes as adolescents an opportunity to work toward lower sentences if they can demonstrate remorse and rehabilitative behavior. These laws
are receiving support from police chiefs, sheriffs, district attorneys, and judges who would call themselves conservatives.

The waves of change are touching Congress. The federal criminal justice and prison system has been sharply criticized by Attorney General Eric Holder as “broken.” In August 2013, Mr. Holder declared “too many Americans go to too many prisons for far too long, and for no truly good law-enforcement reason.”
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He has proposed reforms, many of them similar to successful enactments made a few years ago by arch right-winger and Texas governor Rick Perry.

The facts overwhelmingly back up Mr. Holder's criticisms. The
Economist
reports that “drug offenders are nearly half of all federal prisoners, and most people convicted of federal drug offences received mandatory-minimum sentences.” Possessing five grams of crack cocaine requires a sentence of five years in prison for a first-time offender. From 1980 the federal prison population has increased nearly tenfold, going from 24,000 inmates to 219,000 inmates, while the violent crime rate is one-third lower than what it was in 1982 and less than half that in 1997.
³⁵

An unprecedented alliance of Left-Right and Middle is building around the demand of “no more drug war.” A full-page notice in the
New York Times
on December 20, 2012, asserted that “we strive for the day when drug policies are no longer motivated by ignorance, fear and prejudice but rather by science, compassion, fiscal prudence and human rights, with education and treatment available for everyone.”
³⁶
It featured a Drug Policy Alliance Honorary Board ranging from former chair of the Federal Reserve Paul Volcker to former attorneys general, cabinet secretaries, mayors, and judges.